Working capital is current assets minus current liabilities: the short-term resources a business has left once everything due within a year has been paid. It is a money amount rather than a ratio, which makes it the figure to use when you want to know whether there is enough, rather than whether the proportions look reasonable. Positive working capital means the near-term obligations are covered by near-term assets; negative working capital means they are not.
The amount on its own says little without a sense of scale, so this calculator also expresses it against revenue and converts it into days of trading. A hundred thousand pounds of working capital is generous for a business turning over half a million and precarious for one turning over ten million. Days of working capital, the amount divided by daily revenue, is the cleanest way to compare across sizes and across years.
Note that negative working capital is not automatically a warning sign. Supermarkets and large restaurant groups frequently run it deliberately: customers pay immediately, suppliers are paid on sixty-day terms, and the float funds the business. The distinction is whether the deficit comes from a strong bargaining position or from bills that cannot be met.
The formula
Current assets- Cash, receivables, inventory and prepayments due within a year
Current liabilities- Payables, accruals, tax and short-term borrowings due within a year
Working capital- The difference between the two
Days of working capital- Working capital ÷ annual revenue × 365
How to use this calculator
- Enter total current assets from the balance sheet.
- Enter total current liabilities for the same date.
- Enter annual revenue so the amount can be scaled into days.
- The gauge shows net working capital; the ratio and the days figures sit below it.
Worked examples
$480,000 of current assets against $310,000 of current liabilities
Working capital is $170,000 and the current ratio is 1.55. Against $2,400,000 of annual revenue that is 7.1% of sales, or 25.9 days of trading at $6,575 a day.
What growth does to the requirement
If working capital stays at 7.1% of revenue, growing sales from $2,400,000 to $3,600,000 absorbs a further $85,000 of cash before any profit is banked. This is why profitable companies still run out of money: growth consumes working capital in advance of the margin it earns.
How to read your score
Frequently asked questions
Is working capital the same as cash?
No. It includes inventory and receivables, which are only cash once they are sold and collected. A business can hold healthy working capital and still be unable to pay a bill on Friday if most of it sits in stock.
Can negative working capital be healthy?
Yes, when it comes from favourable terms rather than from distress. Retailers who collect immediately and pay suppliers in sixty days are funded by that gap. The test is whether obligations are actually being met on time.
How much working capital does a business need?
Enough to cover the cash conversion cycle at the current sales level, plus a buffer for seasonality. Expressing it as days of revenue and comparing with your own cash cycle is more useful than any general benchmark.
Does an overdraft count as a current liability?
Yes, along with any borrowing repayable within twelve months and the current portion of longer loans. Excluding them flatters the figure, which is why lenders recompute it themselves.
Working capital reference
| Current assets | liabilities $200k | liabilities $260k | liabilities $310k | liabilities $400k | liabilities $520k |
|---|---|---|---|---|---|
| assets $300k | $100,000 | $40,000 | $-10,000 | $-100,000 | $-220,000 |
| assets $400k | $200,000 | $140,000 | $90,000 | $0 | $-120,000 |
| assets $480k | $280,000 | $220,000 | $170,000 | $80,000 | $-40,000 |
| assets $600k | $400,000 | $340,000 | $290,000 | $200,000 | $80,000 |
| assets $800k | $600,000 | $540,000 | $490,000 | $400,000 | $280,000 |
Negative cells mean current liabilities exceed current assets on that date.
| Working capital | At $1.2m revenue | At $2.4m revenue | At $4.8m revenue |
|---|---|---|---|
| $50,000 | 15 days | 8 days | 4 days |
| $100,000 | 30 days | 15 days | 8 days |
| $170,000 | 52 days | 26 days | 13 days |
| $250,000 | 76 days | 38 days | 19 days |
| $400,000 | 122 days | 61 days | 30 days |
| $600,000 | 182 days | 91 days | 46 days |
The same amount of working capital buys very different cover as turnover grows.