Working capital calculator

What this calculator does

Working capital is the money a business has tied up in day-to-day trading — the difference between its short-term assets and its short-term debts. It's the single best gauge of whether you can pay this month's bills without scrambling. This calculator works out your working capital in pounds and your working-capital ratio, then tells you whether that sits in a healthy range.

You enter your current assets (cash, money owed by customers, and stock) and your current liabilities (suppliers, tax due, and any short-term borrowing). It's built for UK limited companies wanting a quick read on liquidity before they commit to a big order, a new hire, or a funding application.

How to use it

Take the figures from your most recent management accounts or accounting software:

1. Current assets — cash in the bank, debtors (invoices customers haven't yet paid), and the value of stock or work in progress.
2. Current liabilities — creditors (what you owe suppliers), VAT and PAYE due within the year, and the next twelve months of any loan or overdraft.

The calculator returns your working capital and ratio instantly. Run it monthly to spot a trend: a slowly tightening ratio is an early warning long before the bank balance itself runs dry, and it's far easier to act on early.

How to read the result

Two outputs matter. Working capital in pounds is your short-term cushion: positive means your short-term assets cover your short-term debts; negative is a red flag. The working-capital ratio (current assets ÷ current liabilities) puts that in proportion.

As a rough guide, a ratio between 1.5 and 2.0 is comfortable for most trading businesses. Below 1.0 means liabilities exceed assets and you may struggle to meet obligations as they fall due. Above 3.0 can signal the opposite problem — cash, stock or unpaid invoices sitting idle when they could be working. The right number varies by sector; a fast-turnover retailer runs leaner than a manufacturer safely.

The formula in plain English

Two short sums:

Working capital = current assets − current liabilities

Working-capital ratio = current assets ÷ current liabilities

"Current" simply means within the next twelve months — cash you'll use or debts you'll settle inside a year. A stricter version, the quick ratio, strips out stock (which can be slow to sell) to test whether you could pay your bills using only cash and money owed to you. If your headline ratio looks healthy but the quick ratio is thin, your liquidity may be more dependent on shifting inventory than it first appears.

Worked example

A wholesaler holds £18,000 in the bank, is owed £62,000 by customers, and carries £40,000 of stock — current assets of £120,000. It owes suppliers £55,000, has £15,000 of VAT and PAYE due, and £10,000 of loan repayments falling due this year — current liabilities of £80,000.

Working capital = £120,000 − £80,000 = £40,000. Ratio = £120,000 ÷ £80,000 = 1.5 — comfortable. But notice that £40,000 of the assets is stock; the quick ratio (excluding stock) is just 1.0, so the cushion leans on selling inventory. Figures are illustrative.

Limitations and what to do next

A ratio is a snapshot on one day; it can't see a large bill landing next week or a key customer about to pay late. It also treats all current assets as equally liquid, which they aren't — £50,000 of slow stock is not the same as £50,000 in the bank. Read it alongside a forward view.

If your working capital is tight but your business is fundamentally sound, the answer is usually faster collections, longer supplier terms, or a short-term facility to bridge the gap — not a permanent loan against a temporary shortfall. A revolving Credicorp Flex facility is designed for exactly this kind of swing. Pair this with the cash-flow forecast template and the affordability calculator. This is general information, not financial advice.