Working Capital Calculator
Current ratio, quick ratio and the cash conversion cycle that's tying up your money.
Your numbers
Your result
- Current assets
- $372,000
- Current liabilities
- $224,000
- Working capital
- $148,000
- Working capital as % of revenue
- 9.9%
- Current ratioCurrent assets ÷ current liabilities. 1.5–3.0 is healthy.
- 1.66
- Quick ratioCash + receivables ÷ current liabilities. Above 1.0 means you can cover the near term without selling inventory.
- 1.32
- Days sales outstanding (DSO)Average days to collect.
- 51
- Days inventory outstanding
- 26
- Days payables outstanding
- 39
- Cash conversion cycleDays between paying for work and collecting for it.
- 39
- Cash tied up in the operating cycle
- $158,333
Solid working capital position.
You can cover near-term obligations and your cash cycle is reasonable at 39 days. Watch receivables — that's where working capital erodes quietly.
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What this number actually tells you
Working capital is the money available to run the business day to day: current assets minus current liabilities. It's the buffer between you and every timing problem in your business — a slow-paying customer, a materials deposit, a payroll that lands before a big check.
The most useful number here is the cash conversion cycle: how many days pass between paying for work and getting paid for it. If you pay materials and payroll in 15 days and collect in 45, you're financing your customers for a month, and every growth dollar makes that gap bigger.
Free cash by shortening the cycle, not by borrowing. Ten days off your collection time frees real money and costs you no interest.
How the math works
- 01Working capital = current assets − current liabilities.
- 02Current ratio = current assets ÷ current liabilities. Quick ratio = (cash + receivables) ÷ current liabilities.
- 03Days sales outstanding = receivables ÷ annual revenue × 365.
- 04Days inventory outstanding = inventory ÷ annual COGS × 365. Days payables outstanding = payables ÷ annual COGS × 365.
- 05Cash conversion cycle = DSO + DIO − DPO. Cash tied up ≈ cycle days × (annual revenue ÷ 365).
What to do with the answer
- Attack DSO first. Deposits, progress billing, invoicing same-day and calling at day 31 all work and none of them cost money.
- Use supplier terms deliberately. Paying every invoice the day it arrives donates working capital you may need.
- Watch inventory. Materials sitting in a shop or on a truck are cash you already spent.
- Track the current ratio quarterly. If it's trending toward 1.0, you're drifting toward a cash event regardless of what the P&L says.
Want someone to read these numbers with you?
The Growth Assessment is a 30-minute conversation about what your numbers are telling you and what to fix first. No pitch deck, no PDF.
Schedule Your Growth Assessment Or call (737) 888-0415Questions owners ask about this
What is a good current ratio for a small business?
Between 1.5 and 3.0. Below 1.2 means near-term obligations are barely covered and any disruption becomes urgent. Far above 3.0 can mean cash or inventory is sitting idle instead of working.
How do I reduce my cash conversion cycle?
Collect faster (deposits, progress billing, immediate invoicing, real follow-up at 30 days), hold less inventory, and use — not abuse — supplier terms. Cutting collection time from 45 to 30 days on $1.5M of revenue frees roughly $60,000 of cash.
How much working capital does a service business need?
Enough to cover the operating cycle plus a buffer — commonly 10–20% of annual revenue for project-based work with long collection cycles, less for businesses paid at the time of service.
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