Working Capital Calculator
How much cash the day-to-day business ties up, and how long it takes to come back.
The cash cycle in days
Working capital at planned sales
Cash the target days would free at today’s sales
How this was calculated
Results are estimates for general information and planning, not financial advice. Banks and institutions may calculate differently (rounding, fees, rate changes). Confirm figures with your lender or a qualified adviser before deciding.
About the Working Capital Calculator
Working capital is the money tied up in running the business from day to day: the cash, the receivables your customers owe and the stock on your shelves, less what you have to pay within a year — suppliers, short-term loans, wages and taxes due. Enter the current assets and current liabilities from your balance sheet, and the calculator gives the net working capital and the current, quick and cash ratios that lenders and analysts use to judge liquidity.
Add the revenue and the cost of goods sold for the period and it also works out the days of sales outstanding, days of inventory and days of payables, the operating cycle and the cash conversion cycle — how many days your cash is out of the business before customers pay it back — and working-capital turnover. Enter planned sales to see the working capital they will need, and target days to see the cash that collecting sooner, holding less stock or paying on longer terms would free. Everything stays in your browser.
How to use it
- Enter the current assets and current liabilities at the end of the period, from the balance sheet: cash, short-term investments, trade receivables, inventory and other current assets; trade payables, short-term borrowings and other current liabilities. Leave lines you do not have empty.
- Tick I also have the start of the period to enter the opening balances: the days and the turnover then use averages, as analysts do.
- Choose the period the income statement covers and enter the revenue and cost of goods sold — and purchases if you know them — for the days and the cash conversion cycle.
- Optionally open Plan for the working capital at a new sales level and the cash that target days would free.
- Read the results; copy the summary or download the figures as CSV.
Examples
Cash 50,000 · short-term investments 20,000 · receivables 180,000 · inventory 150,000 · other 20,000 Payables 120,000 · short-term loans 60,000 · other 40,000
Net working capital 420,000 − 220,000 = 200,000 Current ratio 1.91 · quick ratio 250,000 ÷ 220,000 = 1.14 · cash ratio 0.32
DSO 180,000 ÷ 1,460,000 × 365 = 45 days DIO 150,000 ÷ 1,095,000 × 365 = 50 days DPO 120,000 ÷ 1,095,000 × 365 = 40 days Cash conversion cycle 50 + 45 − 40 = 55 days Working-capital turnover 1,460,000 ÷ 200,000 = 7.3
Receivables 225,000 + inventory 187,500 − payables 150,000 = 262,500 That is 52,500 more than the 210,000 tied up today
Collecting in 40 days instead of 45 would free 1,460,000 × 5 ÷ 365 = 20,000 at today’s sales.
Common uses
- Check liquidity before applying for a working capital loan or an overdraft.
- Work out how much cash a sales plan or a big new customer will tie up.
- Show the effect of faster collection, leaner stock or longer supplier terms.
- Compare the cash cycle of one year or quarter with the next.
The formulas
- Net working capital = current assets − current liabilities.
- Current ratio = current assets ÷ current liabilities.
- Quick ratio (acid test) = (cash + short-term investments + receivables) ÷ current liabilities: inventory and prepayments are left out because they are not quickly turned into cash.
- Cash ratio = (cash + short-term investments) ÷ current liabilities.
- Days of sales outstanding (DSO) = receivables ÷ revenue × days in the period.
- Days of inventory (DIO) = inventory ÷ cost of goods sold × days.
- Days of payables (DPO) = trade payables ÷ purchases × days.
- Operating cycle = DIO + DSO; cash conversion cycle = DIO + DSO − DPO.
- Working-capital turnover = revenue ÷ average working capital.
These are the liquidity and activity ratios of the CFA Institute’s Financial Analysis Techniques reading. With the start of the period entered, the days and turnovers use (start + end) ÷ 2, as that reading does; the ratios of the balance sheet itself use the end of the period.
Current or not?
An asset is current when you expect to turn it into cash, sell it or use it up within twelve months after the balance-sheet date or within your normal operating cycle, or when it is cash. A liability is current when you expect to settle it within your normal operating cycle, when it is due within twelve months after the balance-sheet date, or when you have no right to put off paying it for at least twelve months. That is the rule of IAS 1, carried forward by IFRS 18, which replaces it; India’s Ind AS 1 follows it.
So the part of a long-term loan repayable in the next twelve months belongs under short-term borrowings, and a deposit you cannot touch for two years does not belong under cash.
The cash conversion cycle
Cash goes out when you pay suppliers and comes back when customers pay you. Stock waits on average DIO days before it sells, and customers then take DSO days to pay: the operating cycle. Suppliers wait DPO days for their money, so your own cash is out for DIO + DSO − DPO days: the cash conversion cycle.
A shorter cycle means less money tied up for the same sales. A negative cycle means customers pay before suppliers have to be paid — suppliers’ credit then funds the business. Each day of DSO ties up revenue ÷ 365 of cash, and each day of DIO (or DPO) cost of goods sold ÷ 365: in the example, collecting one day sooner frees 4,000 and holding one day less stock 3,000.
Working capital for a new sales level
Working capital grows with sales. Holding the days constant, the calculator works out receivables = planned sales × DSO ÷ days, inventory = cost of goods sold × (planned ÷ current sales) × DIO ÷ days, and payables = purchases × (planned ÷ current sales) × DPO ÷ days. The difference from today’s trade working capital is the extra money the growth will tie up — money that has to come from profits, owners or lenders before the extra sales turn into cash. Enter target days to see how much better collection, leaner stock or longer supplier terms would offset it.
As a cross-check the page also shows net working capital kept at today’s share of sales.
Limitations
- The ratios are a snapshot of the balance sheet on one day; a seasonal business can look very different a few months later.
- Days use the period’s revenue and costs spread evenly over the year, with 365 days a year; credit sales alone give a truer DSO if many customers pay at once.
- The plan assumes the same gross margin and the same days unless you enter targets; it does not plan cash, fixed assets or profits.
- There is no universal good value for any ratio: compare with your own history, your lender’s requirements and businesses like yours.
Privacy
Everything happens in your browser. What you enter or open here is not uploaded or stored by MySmartCoPilot.
Frequently asked questions
What is a good current ratio?
There is no single good value. Below 1, current liabilities are larger than current assets, so paying them depends on new cash coming in. A very high ratio can mean idle cash or slow-moving stock and receivables. Compare with your own past figures, your lender’s covenants and similar businesses.
What is the difference between the current ratio and the quick ratio?
The current ratio counts all current assets. The quick (acid-test) ratio counts only cash, short-term investments and receivables, because inventory and prepayments take time to turn into cash. A business with a lot of stock can have a healthy current ratio but a low quick ratio.
How do I calculate the cash conversion cycle?
Add the days of inventory and the days of sales outstanding, then subtract the days of payables. With 50 days of inventory, customers paying in 45 days and suppliers paid in 40 days, the cycle is 50 + 45 − 40 = 55 days.
Why do days of payables use purchases, not sales?
Trade payables are what you owe for purchases, so they are compared with purchases. Without a purchases figure the calculator works it out as cost of goods sold + closing inventory − opening inventory, or, with no opening inventory, uses the cost of goods sold, and says so.
Is negative working capital always bad?
Not always. Businesses paid in cash by customers and on credit by themselves, such as many shops and subscription services, can run on negative working capital safely. For others it can be a sign of trouble paying bills: check the cash ratio and the timing of what falls due.