Working Capital Calculator
Working Capital Calculator
Calculate your net working capital and working capital ratio to see whether your business can cover its short-term obligations.
Money in your business accounts right now
Money your customers owe you
Stock value (0 if service business)
Prepayments, deposits, etc.
What you owe suppliers
Loans, overdrafts due within 12 months
Tax, accrued wages, deferred income
How This Calculator Works
A ratio of 1.2 to 2.0 is ideal. Below 1.0 means liabilities exceed assets. Above 2.0 may indicate idle capital.
This calculator is for educational purposes only and does not constitute financial advice. Consult a qualified accountant for guidance specific to your business.
What Is Working Capital?
Working capital is the cash and near-cash your business has available to cover its day-to-day running costs. It is the simplest measure of short-term financial health, and the formula is:
Working Capital = Current Assets − Current Liabilities
A positive figure means you have more short-term assets than short-term debts – you can meet your obligations as they fall due. A negative figure means your short-term liabilities exceed your short-term assets, which can signal a cash squeeze (though for some business models it is normal – see negative working capital).
What Counts as Current Assets and Current Liabilities?
Current assets are things you expect to turn into cash within 12 months: cash in the bank, trade debtors (money customers owe you), stock and work in progress, prepayments and short-term investments.
Current liabilities are what you owe within 12 months: trade creditors (money you owe suppliers), bank overdraft and short-term loans, VAT, PAYE and corporation tax due, and other short-term payables.
A Worked Example
Imagine a wholesale business in Manchester with £40,000 cash, £120,000 of trade debtors and £90,000 of stock – current assets of £250,000. Against that it owes £110,000 to suppliers and £50,000 in tax and other short-term liabilities – current liabilities of £160,000. Working capital = £250,000 − £160,000 = £90,000.
What Is a Good Working Capital Figure?
There is no single “right” number – it depends on your size and sector. What matters more is the working capital ratio (current assets divided by current liabilities). A ratio between roughly 1.2 and 2.0 is generally considered healthy: enough cushion to pay the bills, but not so much idle cash that it could be working harder. Below 1.0 means you may struggle to meet short-term obligations; well above 2.0 can suggest cash, stock or receivables that are not being used efficiently.
How to Improve Your Working Capital
- Collect faster – tighten credit control to reduce your debtor days.
- Use the full supplier terms available to you without damaging relationships – your creditor days.
- Hold less stock – reduce days inventory outstanding so cash is not sitting on shelves.
- Forecast ahead with a 13-week cash flow forecast to see pinch points before they bite.
Frequently Asked Questions
What is the working capital formula?
Working capital = current assets minus current liabilities. The calculator above does this for you once you enter the figures from your balance sheet.
Is higher working capital always better?
No. Positive working capital matters, but a very high figure can mean cash, stock or unpaid invoices are tied up unproductively. The working capital ratio is a better guide than the raw number.
What is the difference between working capital and cash flow?
Working capital is a snapshot of short-term assets versus liabilities at a point in time; cash flow is the movement of money in and out over a period. See working capital vs cash flow.