How to use the Working Capital Calculator
- Enter total current assets (cash, bank, receivables, inventory and other assets realisable within a year).
- Enter total current liabilities (creditors, short-term borrowings, dues payable within a year).
- Add inventory separately to calculate the quick ratio.
Formula
Working capital = Current assets − Current liabilities
Current ratio = Current assets ÷ Current liabilities
Quick ratio = (Current assets − Inventory) ÷ Current liabilities
Reading the ratios
- Current ratio below 1: short-term liabilities exceed short-term assets — a warning sign.
- Quick ratio excludes inventory, which can take time to sell. It's a stricter test of liquidity.
- What's healthy varies by industry. A retailer with fast-moving stock can run leaner than a manufacturer with long credit cycles.
Worked example
Current assets ₹8.5 lakh (incl. ₹3 lakh stock), current liabilities ₹5 lakh
- Working capital = 8,50,000 − 5,00,000 = ₹3,50,000
- Current ratio = 8.5 ÷ 5 = 1.70
- Quick ratio = (8.5 − 3) ÷ 5 = 1.10
₹3.5 lakh working capital; current ratio 1.70
Frequently asked questions
Can working capital be negative?
Yes. It means current liabilities exceed current assets. Some businesses that collect cash before paying suppliers run this way deliberately, but for most it signals a cash-flow risk.
How can I improve working capital?
Collect receivables faster, hold less slow-moving stock, negotiate longer supplier credit, or refinance short-term debt into longer-term loans.