Working Capital Calculator
Analyze company liquidity and operational efficiency with working capital metrics
Calculate Working Capital
Cash, inventory, accounts receivable, and other assets convertible to cash within 12 months
Accounts payable, short-term debt, and other obligations due within 12 months
Working Capital Results
Formula: Working Capital = Current Assets - Current Liabilities
Calculation: $0 - $0 = $0
WC Ratio: $0 ÷ $0 = 0.00
Liquidity Assessment
Enter values to calculate
Example: Alibaba 2020
Financial Data
Current Assets: $65,377 million
Current Liabilities: $34,159 million
Revenue (2020): $71,985 million
Results
Working Capital: $31,218 million
WC Ratio: 1.91
Status: Strong liquidity position
Key Insights
Liquidity Measure
Shows company's ability to meet short-term obligations
Financial Health
Positive working capital indicates good financial position
Operational Efficiency
Turnover ratio measures how efficiently capital is used
Ratio Benchmarks
< 1.0: Liquidity risk
1.0 - 1.5: Adequate liquidity
1.5 - 3.0: Good liquidity
> 3.0: Excess liquidity
Understanding Working Capital
What is Working Capital?
Working capital, also known as net working capital (NWC), is the difference between a company's current assets and current liabilities. It represents the short-term financial health and operational efficiency of a business.
Why is Working Capital Important?
- •Indicates ability to meet short-term obligations
- •Shows operational liquidity and cash flow
- •Reveals management's efficiency in using resources
- •Helps assess financial stability and growth potential
Formula Breakdown
Working Capital = Current Assets - Current Liabilities
WC Ratio = Current Assets ÷ Current Liabilities
- Current Assets: Cash, inventory, receivables, prepaid expenses
- Current Liabilities: Payables, short-term debt, accruals
- Positive WC: Assets exceed liabilities (good)
- Negative WC: Liabilities exceed assets (concern)
Working Capital Turnover
Turnover = Revenue ÷ Average Working Capital
This ratio measures how efficiently a company uses its working capital to generate sales. A higher ratio indicates better efficiency in using working capital.
- High Turnover: Efficient use of working capital
- Low Turnover: May indicate excess working capital
- Industry Comparison: Compare with similar companies
Management Implications
- •Too High: Excess cash, potential inefficiency
- •Too Low: Liquidity risk, payment difficulties
- •Optimal Level: Balance between liquidity and efficiency
- •Industry Variation: Different sectors have different norms
- •Seasonal Patterns: Consider business cycles