Working capital is the money that keeps the business running day to day: cash, what customers owe you and stock on hand, less what you owe in the next 12 months. This calculator gives your net working capital, current ratio and quick ratio, and shows how a bank’s credit team is likely to read them.
Estimates only. Lenders use their own methods, rates and fees. Results update as you type; nothing you enter leaves your browser.
Working capital formulas
- Net working capital = current assets − current liabilities
- Current ratio = current assets ÷ current liabilities
- Quick ratio = (cash + receivables) ÷ current liabilities
The quick ratio leaves out inventory because stock can take months to turn into cash, and may sell below book value in a downturn. It shows whether you could meet short-term obligations without depending on sales.
Worked example
A trading company holds $25,000 in cash, $60,000 of receivables, $45,000 of inventory and $5,000 of other current assets, a total of $135,000. It owes $40,000 to suppliers, $30,000 on its overdraft, $12,000 of loan instalments due this year and $8,000 of other liabilities, a total of $90,000. Net working capital is $45,000, the current ratio is 1.50x and the quick ratio is 0.94x. The business is liquid overall but still needs to sell some stock to cover all short-term obligations.
What lenders look for
- Current ratio of 1.2x to 2.0x is typical for a healthy SME, though retailers and fast-moving businesses often run lower.
- Quick ratio near 1.0x or above suggests you can pay short-term bills without new sales.
- Trend matters. A falling ratio over two or three years concerns a bank more than one weak year.
- Very high ratios can point to slow-paying customers or excess stock, which ties up cash.
Banks often set working capital limits and overdrafts against receivables and inventory. Learn more in the working capital cycle, explained.
Frequently asked questions
Is negative working capital always bad?
Not always. Supermarkets and some subscription businesses collect cash before they pay suppliers and run negative working capital safely. For most SMEs, though, it signals a funding gap a lender will question.
Should the current portion of long-term debt be included?
Yes. Loan instalments due in the next 12 months are current liabilities. Leaving them out overstates your ratios, and credit analysts will add them back.
How can I improve my current ratio quickly?
Collect overdue receivables, clear slow-moving stock, or refinance short-term borrowing into a term loan. Paying suppliers late only helps on paper and can damage your credit record.
Track how fast cash moves through the business with the cash conversion cycle calculator.
These figures are estimates for planning. They are not financial advice or an offer of credit. See our disclaimer.