Working Capital Calculator

Working Capital Calculator Explained:

(a) What is this? The working capital calculator uses a ratio to determine if the business has enough cash to pay its bills.

(b) What does this tell me? Working capital is used by lenders to guage the ability of a business to meet its short term financial obligations. A general rule of thumb is to have a current ratio of 2.0. Although this will vary by business and industry, the further the business is above 2.0 the less well used the capital is. Less than 2.0 may mean that a business may struggle to meet its financial obligations.

(c) Why should I use it? To assess the health of your organistions working capital. A broad rule is that the business is above 2.0 and therefore that you can meet your financial obligations. You can also take steps to address the ratio if it falls below 2.0.

(d) Caution: Each business is different. A ratio of 2.0 is simply a broad rule of thumb. Any decisions you make as a result of this calculator are based on your inputs. Take professional financial advice regarding working capital and all matters financial. You use this calculator at your own risk.