Working Capital Calculator

Current Assets (₹): Current Liabilities (₹):

Every business owner knows the feeling: a sense of uncertainty about cash flow. Can you cover payroll? Can you pay that big supplier invoice on time? Will a delayed customer payment break your budget?

Stop guessing. It’s time to replace that fear with a single, powerful number.

Our Working Capital Calculator provides an instant snapshot of your company’s financial lifeblood. It’s the fastest way to understand your ability to cover short-term costs and operate with confidence. You’ve already used the tool—now, let’s unlock what that number truly means for your business.

Decoding Your Results: What Your Number Means for You

That figure from our Working Capital Calculator is your business’s short-term health score. Here’s how to read it:

High Positive Working Capital

(Current Assets are much greater than Current Liabilities)
This is a strong position. You have significant financial cushioning to cover all your immediate debts with assets to spare. This gives you the flexibility to invest in growth, handle unexpected emergencies, and negotiate from a position of power.

Watch Out For: An excessively high number might mean you have too much cash sitting idle or too much capital tied up in slow-moving inventory.

Low or Zero Working Capital

(Current Assets are roughly equal to Current Liabilities)
This is a warning sign. You are on a financial tightrope. While you can technically meet your obligations today, there is no margin for error. A single unexpected expense or a customer paying late could instantly plunge you into a negative position, creating a cash flow crisis.

Negative Working Capital

(Current Assets are less than Current Liabilities)
This is a red flag requiring immediate action. Your business does not have enough liquid assets to cover its upcoming bills. This puts you at high risk of late payment penalties, damaged supplier relationships, and potential loan defaults. For most businesses, this is an unsustainable position that must be addressed.

The Actionable Playbook: 5 Ways to Improve Your Working Capital

If you’re not happy with your score, don’t worry. You now have the clarity needed to fix it. Use these proven strategies to improve your number.

Turbo-Charge Your Invoicing (Accounts Receivable)
- Why it works: The faster you get paid, the faster your cash position improves.
- Action Steps: Invoice clients the moment a job is done. Offer a small (1-2%) discount for payment within 10 days. Use accounting software to automate reminders for overdue invoices.
Turn Your Shelves into Cash (Inventory Management)
- Why it works: Every item sitting in your warehouse is cash you can’t use.
- Action Steps: Implement a “first-in, first-out” (FIFO) system. Run a sale or promotion on slow-moving products. Use inventory management software to avoid over-stocking.
Become a Better Negotiator (Accounts Payable)
- Why it works: The longer you can hold onto your cash before paying bills, the better your working capital.
- Action Steps: Respectfully ask your key suppliers to extend your payment terms from 30 days to 45 or 60 days. This is a common and often accepted business practice.
Restructure Your Debt
- Why it works: High-interest, short-term loans are a drain on your current liabilities.
- Action Steps: Speak with your bank or lender about consolidating short-term debts into a single, long-term loan. This immediately reduces your current liabilities and improves your working capital score.
Conduct a “Cash Drain” Audit
- Why it works: Small, recurring expenses add up and drain your available cash.
- Action Steps: Review all your monthly subscriptions and operational expenses. Cut anything that isn’t providing a clear return on investment.

Pro-Tip: After planning these changes, scroll up and use the calculator again with projected numbers to see how your score could improve!

Industry Benchmarks: Is Your Working Capital "Good"?

“Good” is relative. A retailer needs a very different working capital level than a software company. Here are some general industry benchmarks to give you context for your result (often expressed as the Current Ratio: Current Assets / Current Liabilities).

Retail: Often aims for a ratio between 1.5 and 2.5. Needs high working capital to manage large inventories.
Manufacturing: Typically targets 1.5 to 2.0. Requires capital for raw materials and work-in-progress inventory.
Consulting/Service Businesses: Can operate with a lower ratio, often 1.2 to 1.5, as they have little to no inventory.
SaaS/Software: Can sometimes operate with a ratio near 1.0 or even slightly below if they have strong, predictable recurring revenue and low upfront costs.

Beyond the Calculator: Working Capital vs. Cash Flow

Many people confuse these critical terms. Here’s a simple way to remember the difference:

Working Capital: A snapshot from your balance sheet. It tells you your financial position right now.
Cash Flow: A video of your finances over a period (e.g., a month). It shows the movement of cash in and out of your business.

Poor working capital management (like slow collections or bloated inventory) is a primary cause of negative cash flow, even in a profitable company. Fixing your working capital is one of the best ways to fix your cash flow.

Expanded FAQ

How do you calculate working capital from a balance sheet?

You find the “Total Current Assets” line on your balance sheet and subtract the “Total Current Liabilities” line. Our Working Capital Calculator automates this process to give you an instant, error-free result.

Can a company be profitable but have negative working capital?

Absolutely. This is a common trap for fast-growing businesses. Your income statement can show a healthy profit, but if all your cash is tied up in new inventory or unpaid customer invoices, you can run out of money to pay your bills. This is why calculating working capital is so crucial.

What is the "working capital cycle"?

The working capital cycle measures the time it takes to convert your current assets and liabilities into cash. A shorter cycle is better because it means your money isn’t tied up for long periods. Improving the metrics in our “playbook” above will shorten your cycle.

Is working capital the same as the "current ratio"?

They are related but different. Working capital is a dollar amount (Assets – Liabilities). The current ratio is a ratio (Assets / Liabilities). Both measure liquidity, but the ratio is often used to compare businesses of different sizes or against industry benchmarks.

How to Use the Allsums 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.

Bookmark this page. Make our Working Capital Calculator a key part of your monthly financial review to stay ahead of problems and build a more resilient business.