💸 Working Capital Calculator
Calculate net working capital from current assets minus current liabilities.
Working Capital and Liquidity
Net Working Capital = Current Assets − Current Liabilities. Positive working capital means you can cover short-term obligations. Current Ratio = Current Assets ÷ Current Liabilities. A ratio above 1.5–2.0 is generally healthy. Quick Ratio excludes inventory (less liquid), providing a more conservative liquidity measure.
Working Capital Management
Optimizing working capital improves cash flow without external financing: reduce AR collection period (collect faster), extend AP payment terms (pay slower without penalty), and minimize inventory levels (just-in-time). Amazon famously has negative working capital — customers pay instantly, but Amazon pays suppliers 60–90 days later, creating a built-in cash float.
People Also Ask
For most industries, 1.5–2.0 is considered healthy. Below 1.0 means current liabilities exceed current assets — potentially a liquidity crisis. Above 3.0 may indicate inefficiency (too much idle cash or excessive inventory). Industry benchmarks vary: manufacturing often targets 2.0; tech companies often have higher ratios.
Yes — some very efficient businesses (Amazon, Walmart, major retailers) operate with negative working capital by collecting cash from customers faster than they pay suppliers. This is a sign of business strength, not weakness. For most businesses, negative working capital is a risk that requires management.