Working Capital Calculator
Evaluate a company's short-term financial health with our working capital calculator. Enter current assets, current liabilities, and inventory to calculate working capital, the current ratio, and the quick ratio (acid test).
Working capital is the difference between a company's current assets and current liabilities. It represents the funds available for day-to-day operations and is a fundamental measure of short-term financial health. The formula is simply: Working Capital = Current Assets - Current Liabilities. Positive working capital means the company can pay its short-term obligations; negative working capital signals potential liquidity problems.
The current ratio (Current Assets / Current Liabilities) expresses this relationship as a ratio. A current ratio above 1.0 means the company has more current assets than current liabilities. Most analysts consider a ratio between 1.5 and 3.0 to be healthy, though this varies by industry. Very high ratios may indicate inefficient use of assets.
The quick ratio (also called the acid test) is a stricter measure that excludes inventory from current assets: (Current Assets - Inventory) / Current Liabilities. Inventory is excluded because it may not be easily convertible to cash. A quick ratio above 1.0 suggests the company can meet its short-term obligations without relying on inventory sales. This metric is especially important for businesses with slow-moving inventory.