Cash, receivables and inventory due within a year.
Used for the stricter quick ratio.
Payables, short-term loans and tax due within a year.
You have comfortable cover for short-term obligations. If the ratio is very high (above ~3), check you're not leaving cash idle that could be put to work.
Assets vs liabilities
The gap between the bars is your working capital.
How working capital is calculated
Working capital is what's left of your short-term assets after covering your short-term bills. The ratios express the same idea as a multiple:
Working capital = Current assets − Current liabilities
Current ratio = Current assets ÷ Current liabilities
Quick ratio = (Current assets − Inventory) ÷ Current liabilities
Why it matters
Working capital is the day-to-day liquidity that keeps a business trading. Positive working capital means you can meet obligations as they fall due; negative means you're relying on future income to pay today's bills. The quick ratio strips out inventory because stock can't always be turned into cash quickly.
As a rough guide, a current ratio around 1.5–3 is healthy. Below 1 is a warning sign; far above 3 can mean cash sitting idle.
Frequently asked questions
What are current assets and current liabilities?
Current assets are things you expect to turn into cash within a year — cash, receivables (money owed to you), and inventory. Current liabilities are what you owe within a year — payables, short-term loans, tax due, and accruals.
Why look at the quick ratio as well?
Inventory can be slow or hard to sell at full value. The quick ratio removes it, showing whether you could cover short-term bills from your more liquid assets alone — a stricter test of liquidity.
Can working capital be too high?
Yes. A very high current ratio can mean cash, stock or receivables are tied up rather than being reinvested. Efficient businesses keep enough of a cushion to be safe without hoarding idle assets.
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These calculators are for general guidance only and use the figures you enter. They are not financial, accounting or tax advice. Always check important decisions with a qualified professional.