Working Capital Calculator
Calculate net working capital, the current ratio, and the quick (acid-test) ratio from current assets, inventory, and current liabilities.
How to use this tool
- Enter your total current assets.
- Enter your total current liabilities.
- Enter the inventory portion of current assets (for the quick ratio).
- Read net working capital, current ratio, quick ratio, and a liquidity verdict.
Check your short-term financial health. Enter current assets, current liabilities, and inventory to get net working capital, the current ratio, and the quick (acid-test) ratio.
Formula
Net working capital = Current assets − Current liabilities
Current ratio = Current assets ÷ Current liabilities
Quick (acid-test) ratio = (Current assets − Inventory) ÷ Current liabilities
The current ratio counts all current assets; the quick ratio excludes inventory, which is the hardest current asset to turn into cash quickly.
How it works
Working capital measures a company's short-term financial health: whether it has enough liquid resources to cover obligations coming due within a year. Net working capital is simply current assets minus current liabilities; a positive figure means short-term assets exceed short-term debts. The current ratio expresses the same comparison as a multiple, and the quick (or acid-test) ratio is a stricter version that removes inventory, since stock can be slow or costly to convert into cash.
Interpretation depends on the business model. A current ratio comfortably above 1.0 — often cited as 1.5 to 3.0 — signals healthy liquidity, while a ratio below 1.0 warns that liabilities outweigh liquid assets. But a very high ratio is not automatically good: it can mean cash, receivables, or inventory are sitting idle instead of being put to work. Some efficient businesses even operate with negative working capital because customers pay before suppliers do. Read these ratios in the context of your industry and cash-conversion cycle rather than against a single universal threshold.
Reviewed by the AbraCalc Business Desk. Educational estimate only, not financial advice; classify current assets and liabilities according to your accounting standards.
Worked example
$150k current assets, $100k liabilities, $40k inventory
- Net working capital = 150,000 − 100,000 = 50,000.
- Current ratio = 150,000 ÷ 100,000 = 1.50x.
- Quick ratio = (150,000 − 40,000) ÷ 100,000 = 1.10x.
- A current ratio of 1.5 indicates comfortable short-term liquidity.
Net working capital = $50,000.00, current ratio = 1.50x
Current ratio for $100,000 liabilities by current assets
| Current assets | Net working capital | Current ratio |
|---|---|---|
| $80,000 | -$20,000 | 0.80x |
| $100,000 | $0 | 1.00x |
| $120,000 | $20,000 | 1.20x |
| $150,000 | $50,000 | 1.50x |
| $200,000 | $100,000 | 2.00x |
| $300,000 | $200,000 | 3.00x |
| $400,000 | $300,000 | 4.00x |
Key terms
- Net working capital
- Current assets minus current liabilities; positive means liquid assets exceed near-term obligations.
- Current ratio
- Current assets divided by current liabilities; a basic liquidity measure.
- Quick ratio
- The acid-test ratio: current assets minus inventory, divided by current liabilities.
- Current liabilities
- Obligations due within a year, such as accounts payable, accrued expenses, and short-term debt.
Frequently asked questions
- What is a good current ratio?
- A current ratio between about 1.5 and 3.0 is often considered healthy, signalling enough liquid assets to cover near-term obligations without excessive idle capital. Below 1.0 is a warning sign; far above 3.0 may mean assets are not being used productively.
- How is the quick ratio different from the current ratio?
- The quick or acid-test ratio removes inventory from current assets before dividing by current liabilities. Because inventory can be slow or costly to sell, the quick ratio is a stricter test of whether you can meet obligations with your most liquid assets.
- Can working capital be negative and still be fine?
- Yes for some business models. Companies that collect from customers before paying suppliers — certain retailers and subscription businesses — can run with negative working capital efficiently. Judge it against your industry and cash-conversion cycle.