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Working Capital Calculator

Your working capital is the reserve you use to pay vendors, purchase inventory, and cover any other expenses that crop up in everyday business operations. You need to know that your working capital will be consistently available and that you'll have money on hand to meet all of your short-term needs. Use this convenient calculator to determine how much working capital your business will need for the year.

 

Definitions

Annual growth
The percent of growth you expect over the next year.

Total current assets
This is any cash or asset that can be quickly turned into cash. This includes prepaid expenses, accounts receivable, most securities and your inventory.

Total current liabilities
This is a liability in the immediate future. This includes wages, taxes and accounts payable.

Current ratio
Current Assets divided by current liabilities. Your current ratio helps you determine if you have enough working capital to meet your short-term financial obligations. A general rule of thumb is to have a current ratio of 2.0. Although this will vary by business and industry, a number above two may indicate a poor use of capital. A current ratio under two may indicate an inability to pay current financial obligations with a measure of safety.

Working capital
Working capital is used by lenders to help gauge the ability for a company to weather difficult financial periods. Working capital is calculated by subtracting current liabilities from current assets. Due to differences in businesses and the fact that working capital is not a ratio but an absolute amount, it is difficult to predict what the ideal amount of working capital would be for your business. To calculate working capital requirements this calculator uses the 'Current Ratio' to determine a target amount of working capital. See the 'Current Ratio' definition for more information.

Information and interactive calculators are made available to you as self-help tools for your independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.

Small Business Calculators