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Working Capital Calculator
Managing your business’s day-to-day cash needs is a big part of staying on track financially. The Working Capital Calculator from Dexovise is a free tool that shows how much money you have to cover short-term operations by looking at your current assets and liabilities. Try it out by putting in your numbers to see your business’s working capital position right away.
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What is Working Capital?
Working capital is the amount of money a business has left when its current liabilities are subtracted from its current assets. It tells how much cash and other short-term resources are there to keep the business running and pay your current liabilities in a year.
This comes from taking total current assets and taking away total current liabilities, showing your working capital. There’s also a working capital ratio that divides current assets by current liabilities, giving another way to check your liquidity.
Current assets are the things a business can turn into cash or use up within a year—like cash in hand, bank balances, accounts receivable from customers, inventory for sale, and prepaid expenses such as rent paid early.
Current liabilities are what the business owes in the same year, including accounts payable to suppliers, short-term loans, accrued expenses like wages, taxes payable, and any current part of long-term debt.
Working capital is an important measure as it shows if a business has enough funds to handle its operations. The ratio adds a view of how well assets cover debts.
What is Net Working Capital?
The concept of Net Working Capital is slightly different from Working Capital.
Under Net Working Capital, current assets like cash and other short-term investments, such as treasury bills (T-Bills), marketable securities, commercial paper are excluded. Also the current liabilities like any interest-bearing debt, like loans and corporate bonds, are also excluded.
This is why because the cash and cash equivalents, as well as debt and interest-bearing securities, are not considered as non-operational items. These are not directly contribute towards the revenue generating activities, means they are not part of the core operations of a business model.
The formula for New Working Capital is:
Net Working Capital (NWC) = Operating Current Assets − Operating Current Liabilities
How to calculate Working Capital and Working Capital Ratio
Finding your net working capital and its ratio is a job you can do when your financial numbers are ready.
Net working capital is found by subtracting your total current liabilities from your total current assets. The working capital ratio comes from dividing total current assets by total current liabilities.
These are written as:
Working Capital = Total Current Assets – Total Current Liabilities
Working Capital Ratio = Total Current Assets ÷ Total Current Liabilities
To work these out by hand, here’s what to do:
- Gather your current assets, like cash, accounts receivable, and inventory.
- Add them up for the total current assets.
- List your current liabilities, such as accounts payable and accrued expenses.
- Add those for the total current liabilities.
- Subtract total current liabilities from total current assets to get net working capital.
- Divide total current assets by total current liabilities for the working capital ratio.
For example, if your current assets are $80,000 and liabilities are $50,000,
Net working capital = $80,000 – $50,000 = $30,000
Net Working Capital ratio = $80,000 / $50,000 = 1.60 times
The Working Capital Calculator handles both for you, just enter your figures, and it shows the net amount and ratio, simple and fast.
What Your Working Capital Numbers Show?
Once you have your working capital from the calculator, it’s good to know what this figure says about your business.
Net working capital is the money left after current liabilities are taken from current assets, showing how much you have for daily operations. The working capital ratio tells how many times your current assets can cover your current liabilities.
These numbers let you see your business’s cash position plain and clear.
A net working capital above zero, means your current assets are more than your current liabilities, giving you a cushion to pay bills and keep running. If it’s below zero your current liabilities are more than your current assets, and you might need extra cash to cover what’s due.
The ratio works the same way- a number above 1 shows your current assets are more than your current, while below 1, like 0.80, means your current assets are not sufficient to cover your current liabilities.
For example, a business with $50,000 in assets and $40,000 in liabilities has $10,000 net working capital and a 1.25 ratio, showing it’s got some room to work.
This tells if your business has the funds it needs to meet the immediate liabilities right now.
Why Working Capital is critical for Your Business
Working capital is a big piece of your business’s financial health because it shows how much money you have to use every day. It’s what keeps things going when bills come up.
These are the reasons it’s a key measure:
- It shows your cash for operations: Working capital tells if your current assets can pay liabilities such as accounts payable, keeping your business moving.
- It matters to those who lend: Banks and suppliers check working capital to see if you’ve got enough to cover debts. A good number, like $20,000 or a 1.50 ratio, makes them trust you more.
- It helps you spot trouble: Watching your working capital shows if liabilities are growing too fast or assets are stuck, so you can fix it early.
Working Capital explained with a Real Example
Looking at a real case helps you see how working capital and its ratio come together for a business. Let’s take a small retail store and check its numbers.
Here’s what the store’s books look like:
| Category | Amount ($) |
| Current Assets | |
| Cash | 15,000 |
| Bank Balance | 20,000 |
| Marketable Securities | 30,000 |
| Accounts Receivable | 25,000 |
| Inventory | 30,000 |
| Total Current Assets | 120,000 |
| Current Liabilities | |
| Accounts Payable | 35,000 |
| Short-term Debt | 20,000 |
| Accrued Expenses | 15,000 |
| Total Current Liabilities | 70,000 |
Operating Current Assets = Total Current Assets – Cash – Bank Balance – Marketable securities
= 120,000 – 15,000 – 20,000 – 30,000 = $55,000
Operating Current Liabilities = Total Current Liabilities – Short-term debt
= 70,000 – 20,000 = $50,000
Working Capital = Total Current Assets – Total Current Liabilities
$120,000 – $70,000 = $50,000
Net Working Capital= Operating Current Assets − Operating Current Liabilities
= 55,000 – 50,000 = $5,000
Working Capital Ratio = $120,000 / $70,000 = 1.71 times
Net Working Capital Ratio = 55,000 / 50,000 = 1.1 times
This business has $40,000 in working capital, meaning they have that much cash free after current liabilities, and a ratio of 1.80, showing its current assets cover current liabilities nearly twice over.
For this business, this is a good liquidity position, they have the money to pay suppliers and keep stock moving.
Why a Change in Working Capital Matters to Lenders and Investors
A change in your working capital can tell a lot about how your business is doing over time. It comes from shifts in your current assets and current liabilities, showing if you have more or less money to run things.
This is something lenders and investors watch closely. The following points explain why they find it important:
- When your working capital goes up, it means your current assets increased more than your current liabilities, showing extra funds for operations or growth.
- If your net working capital falls, it happens because current liabilities grew faster than current assets, suggesting you may need cash soon to meet what’s due.
- Lenders pay attention to this change to judge if your business can repay loans without trouble, especially when liabilities rise without matching assets.
- Investors look at it to understand if your business has enough cash to stay strong, or if it’s low and might need outside funds.
- Any shift shows how you handle cash flow, letting them know if your business stays steady or could face problems later.
This is key for lenders and investors because it helps them see your business’s financial health and safety for their money.
How the Working Capital Calculator Helps
The free online working capital calculator from Dexovise is a tool that helps you see how much money your business has for daily needs. It takes your current assets and current liabilities to give you a clear number.
The following points show how it supports your business:
- You enter your current assets and current liabilities, and it works out the net working capital and ratio without needing tough figuring.
- It tells you how much cash remains after covering current liabilities, letting you know what funds are ready to use now.
- The calculator reveals if your current assets are enough to pay your current liabilities, giving a complete view of your money situation.
- It figures everything out quickly, so you don’t have to spend time adding and subtracting by hand.
- You can check it often to see how your working capital changes, helping you follow your cash position over time.
This tool is useful because it makes your business’s financial standing easy to understand and manage.
How to improve your Working Capital
When you improve your working capital, your business will have more funds available for operations. It comes from adjusting your current assets and current liabilities.
The following measures will help you improve it:
- Sell more goods or services to increase cash coming in, adding to your current assets for covering current liabilities.
- Pay off some current liabilities, like accounts payable, to bring down what you owe in the short term.
- Ask suppliers for longer payment times, keeping cash among your current assets before it’s paid out.
- Collect accounts receivable sooner by making payment terms clear, turning them into cash faster.
- Reduce inventory that doesn’t sell well, freeing up cash to use for other needs.
These measures count because they help your business hold more cash and look better to those who might lend or invest.
More to explore
Knowing your working capital is a strong start to managing your business’s cash well. Look at more tools and services from Dexovise to help your business grow steady and sure.
