Working Capital Ratio Calculator
Evaluate whether your business has enough short-term assets to cover debts coming due. Enter current assets and current liabilities to calculate the working capital (current) ratio, a foundational indicator of day-to-day liquidity.
CalcSimpler Examples
- $50,000 assets ÷ $25,000 liabilities ⇒ 2.00 ratio
- $80,000 assets ÷ $60,000 liabilities ⇒ 1.33 ratio
- $120,000 assets ÷ $80,000 liabilities ⇒ 1.50 ratio
FAQ
What does the ratio indicate?
It shows whether your company can meet short-term obligations with assets that convert to cash within a year.
What is a good ratio?
Many analysts view 1.2–2.0 as healthy, but ideal targets vary by industry and business model.
What if liabilities are zero?
With no current liabilities the ratio is undefined and effectively infinite, showing no short-term obligations on the books.
Is a ratio below 1 problematic?
Often yes—it suggests liabilities exceed assets, so the company may need additional financing or tighter working capital management.
How can I improve the ratio?
Accelerate receivables, reduce excess inventory, and refinance short-term debt into longer-term obligations where possible.
Additional Information
- The working capital ratio is also called the current ratio in financial statements.
- A ratio above 1.0 indicates more short-term assets than liabilities, while below 1.0 can signal potential cash flow stress.
- Comparing the ratio to industry benchmarks helps determine whether liquidity levels are appropriate.
- Seasonal businesses may see large swings in current assets and liabilities; analyze trends over several periods.
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