From current assets and current liabilities, compute the working capital that reflects short-term solvency and operating flexibility.
Input Data
Results
At a glance:Working capital is current assets minus current liabilities, representing the short-term funds available for day-to-day operations.
Formula
workingCapital = currentAssets − currentLiabilities
$$\text{Working Capital} = \text{Current Assets} - \text{Current Liabilities}$$$$\text{Current Ratio} = \dfrac{\text{Current Assets}}{\text{Current Liabilities}}$$How to Use
- Enter the current assets.
- Enter the current liabilities.
- Read the working capital.
FAQ
Is negative working capital always a problem?
Not necessarily. Negative working capital means current liabilities exceed current assets and is usually a warning of turnover pressure; but some business models (e.g. supermarkets, fast food—collect cash fast, pay slow) run stably on negative working capital thanks to high-speed turnover. The key is whether cash flow is stable, supplier payment terms and inventory turnover are sound—do not judge by positive/negative alone.
Is more working capital always better?
No. Too much working capital may mean idle cash, overstocked inventory or uncollected receivables—low capital efficiency and high opportunity cost. The ideal is 'enough to support operations without waste'. Read it together with inventory turnover and receivable/payable days (cash cycle) to balance liquidity and efficiency.
What is the difference between working capital and the current ratio?
Working capital is the absolute amount 'current assets − current liabilities'; the current ratio is the ratio 'current assets ÷ current liabilities'. The amount shows scale, the ratio shows the multiple, enabling cross-company comparison (e.g. a ratio of 1.5 means current assets are 1.5× current liabilities). They complement: the amount tells the buffer size, the ratio tells the coverage multiple; usually analysed together for short-term solvency.
How do Hong Kong SMEs manage working capital?
Common practices: speed up receivables collection (shorten customer terms, offer early-payment discounts), optimise inventory to avoid overstock, and negotiate longer supplier payment terms to free cash; for gaps, use the HK Mortgage Corporation's SME Financing Guarantee Scheme or banks' revolving loans / trade finance facilities to bridge. The goal is smooth turnover while avoiding cash locked unnecessarily in inventory or receivables.
What is the relationship between working capital and the cash conversion cycle (CCC)?
The cash conversion cycle (CCC) = inventory days + receivables days − payables days; it measures the days for cash to go from procurement to collection, a dynamic indicator of working-capital efficiency. A shorter CCC means cash returns faster and less working capital is tied up for the same business scale. The working-capital amount alone is a static snapshot; with the CCC you see whether the capital is used efficiently.
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.