Working Capital Ratio Calculator Formula
Understand the math behind the working capital ratio calculator. Each variable explained with a worked example.
Formulas Used
Working Capital
working_capital = current_assets - current_liabilitiesWorking Capital Ratio
wc_ratio = current_liabilities > 0 ? current_assets / current_liabilities : 0Working Capital as % of Revenue
wc_to_revenue = annual_revenue > 0 ? ((current_assets - current_liabilities) / annual_revenue) * 100 : 0Variables
| Variable | Description | Default |
|---|---|---|
current_assets | Total Current Assets(USD) | 450000 |
current_liabilities | Total Current Liabilities(USD) | 300000 |
annual_revenue | Annual Revenue(USD) | 2000000 |
How It Works
How to Calculate Working Capital
Formula
Working Capital = Current Assets - Current Liabilities Working Capital Ratio = Current Assets / Current Liabilities
Working capital represents the operational liquidity available to run day-to-day business activities. Positive working capital means you have a buffer; negative working capital means short-term debts exceed short-term assets. Measuring working capital as a percentage of revenue helps you compare across different-sized businesses.
Worked Example
A company has $450,000 in current assets, $300,000 in current liabilities, and $2,000,000 in annual revenue.
- 01Working Capital = $450,000 - $300,000 = $150,000
- 02Working Capital Ratio = $450,000 / $300,000 = 1.50
- 03WC as % of Revenue = $150,000 / $2,000,000 x 100 = 7.5%
Ready to run the numbers?
Open Working Capital Ratio Calculator