Free Working Capital Calculator. Measure liquidity and assess your business's short-term financial health.
Free Working Capital Calculator. Measure liquidity and assess your business's short-term financial health.
Generated: 1/13/2026, 7:18:42 AM | AskSMB.io
Cash, accounts receivable, inventory, and other short-term assets
Short-term debts and obligations due within one year
Working Capital
$0
Current Ratio
0
Liquidity Status
🔴 Weak Liquidity
Working capital is the lifeblood of your business—it represents the funds available for daily operations. Calculated as current assets minus current liabilities, it shows whether you have enough liquid resources to cover short-term obligations and operate smoothly. Current assets include cash, accounts receivable (money customers owe you), inventory, and other assets convertible to cash within a year. Current liabilities include accounts payable (money you owe suppliers), short-term loans, and other debts due within a year. Positive working capital means you can pay your bills; negative working capital signals potential financial stress.
For small and medium businesses, working capital is crucial because it determines your ability to: operate day-to-day by paying suppliers, employees, and rent on time; weather unexpected challenges like slow sales months or emergency expenses; seize growth opportunities without scrambling for financing; maintain good supplier relationships by paying on time (which often leads to better terms and discounts); and avoid expensive emergency financing or late fees. Many profitable businesses fail due to poor working capital management—they have revenue and orders but can't pay bills because cash is tied up. Effective working capital management provides financial flexibility and stability.
While related, working capital and cash flow measure different things:
You can have positive working capital but negative cash flow (if you're investing heavily), or negative working capital but positive cash flow (if you collect from customers faster than you pay suppliers, like many retailers). Both metrics are important: working capital for short-term financial health, cash flow for long-term sustainability. Manage both to ensure your business thrives.
A healthy working capital level depends on your industry and business model, but general guidelines include:
Industry matters: retailers with fast inventory turnover can operate at lower ratios (1.0–1.5), while manufacturers with slower cycles need higher ratios (2.0–3.0). Know your industry's norms and your own business cycle.
Inputs:
Results:
This business has strong short-term financial health. With $45,000 in working capital and a current ratio of 1.6, it can comfortably meet all short-term obligations with room to spare. For every $1 of short-term debt, the business has $1.60 in liquid assets. This cushion provides flexibility to handle unexpected expenses, slow sales periods, or growth opportunities. The business should maintain this healthy position by continuing to collect receivables efficiently, managing inventory carefully, and monitoring cash flow.