Working Capital Calculator
Calculate working capital, current and quick ratios, working capital as a share of revenue, and how much additional funding a planned growth rate will require.
Last reviewed by the Radiatus Cloud team
Current assets
Current liabilities
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The money the business needs to run
Working capital is current assets less current liabilities: what the business owns that will turn into cash within a year, less what it owes within the same period. Positive working capital means short term obligations are covered by short term assets. It is the most direct measure of whether a company can pay what falls due, and it is where most business failures show up first, well before profitability becomes the issue.
Liquid is not the same as current
The current ratio counts inventory as a current asset, which assumes it can be sold at book value in a hurry. It usually cannot. The quick ratio, which excludes inventory and prepayments, is the more honest measure for a business holding stock that is slow moving or seasonal. A retailer with a current ratio of 2.0 and a quick ratio of 0.4 is not liquid; it is holding a warehouse full of goods and hoping.
Growth consumes working capital before it produces profit
Every additional unit of revenue requires proportionally more receivables and inventory, funded before the customer pays. A business with working capital at fifteen percent of revenue needs 150 thousand of additional funding for every million of new revenue, and needs it before the associated profit arrives. That is why the most common cause of failure among growing companies is not a lack of profit but a lack of cash, and why the working capital ratio is the number that determines how fast a business can safely grow.
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Frequently Asked Questions
What is a healthy current ratio?
Between 1.5 and 3 is the conventional range, but it varies enormously by sector. A supermarket operates comfortably below 1 because it collects instantly and pays suppliers late; a manufacturer holding months of inventory needs far more.
Why does the quick ratio exclude inventory?
Because inventory is the least liquid current asset. Converting it to cash requires selling it, which takes time and often a discount. The quick ratio asks whether obligations can be met without relying on that.
Can working capital be too high?
Yes. Excess working capital is capital earning nothing: cash sitting idle, receivables not collected, inventory not sold. A current ratio persistently above 3 usually indicates money trapped in the operating cycle rather than a strong balance sheet.
How much funding does growth need?
Roughly the working capital ratio multiplied by the revenue increase. At 15 percent of revenue, growing by a million requires about 150 thousand of additional funding before the profit on that revenue arrives.
What is negative working capital and is it bad?
Current liabilities exceeding current assets. For most businesses it signals a liquidity problem. For those collecting from customers before paying suppliers, such as supermarkets and subscription businesses, it is a structural advantage that funds the operation.
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How to Use
Enter current assets and liabilities to get liquidity ratios and the funding growth will need.
Disclaimer: This tool is provided "as is" without warranty of any kind. Results are for educational and utility purposes.
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