How to Use the Working Capital Calculator

The Working Capital Calculator is a simple yet powerful tool designed to help businesses assess their short-term financial health by calculating the difference between current assets and current liabilities. This metric, known as working capital, provides insights into liquidity and ensures businesses can meet their short-term obligations. Follow these steps to use the calculator:

Step 1: Enter Current Assets

• Input the total value of assets that can be converted into cash within a year in the “Current Assets (₹)” field.
• Examples of current assets include:
  • Cash and bank balances
  • Inventory
  • Accounts receivable
  • Marketable securities
• For example:
  • If your current assets total ₹500,000, enter 500000.

Step 2: Enter Current Liabilities

• Input the total value of obligations due within a year in the “Current Liabilities (₹)” field.
• Examples of current liabilities include:
  • Accounts payable
  • Short-term loans
  • Accrued expenses
• For example:
  • If your current liabilities total ₹300,000, enter 300000.

Step 3: Calculate Working Capital

• Click the “Calculate Working Capital” button to generate the result.
• The calculator will display:
  • Working Capital: The difference between current assets and current liabilities.
  • Additional context based on the result:
    • Positive Working Capital: Indicates a strong short-term financial position.
    • Zero Working Capital: Indicates a balance between assets and liabilities, but no surplus.
    • Negative Working Capital: May indicate potential liquidity issues.

Understanding the Results

• Positive Working Capital: The business has sufficient liquid assets to cover its short-term liabilities. This is a sign of strong financial health and operational stability.
• Zero Working Capital: The business has just enough assets to meet its liabilities but lacks a buffer for unexpected expenses or opportunities.
• Negative Working Capital: The business may struggle to meet its short-term obligations and should address liquidity concerns immediately.

Example:

• If your current assets are ₹500,000 and current liabilities are ₹300,000:
  • Working Capital: ₹200,000 (Positive)
  • Interpretation: Your business has ₹200,000 in surplus assets to cover short-term obligations.