What's a good current ratio?

Around 1.5 to 3 is a common comfort zone, but it depends on the business. A grocery store turns inventory so fast it can run below 1; a manufacturer usually needs more.

How can I improve working capital?

Collect faster (invoice promptly, follow up, take cards), carry less inventory, stretch payables within the terms, or refinance short-term debt into long-term debt.

Should I use average balances for the days figures?

Averages (beginning plus ending, divided by two) are better when balances swing during the year. This uses the balances you enter, so put in averages if you have them.

Business & Pricing

Working Capital Calculator

Can you pay the bills coming due this year? Working capital and the current, quick, and cash ratios from your balance sheet — plus how long cash is tied up between paying suppliers and getting paid.

Ben / Reviewed Sep 27, 2026 / v2.0.0

Results

Showing the numbers you calculated

Working capital: $110,000.00; $260,000.00 − $150,000.00
Current ratio: 1.73; Current assets ÷ current liabilities
Quick ratio: 0.90; Cash, investments, and receivables ÷ current liabilities
Cash ratio: 0.40; Cash and investments ÷ current liabilities
Cash conversion cycle: 50.7; Days from paying suppliers to collecting from customers
Days to collect (DSO): 30.4
Days of inventory (DIO): 67.6
Days to pay suppliers (DPO): 47.3

What it says

A current ratio of 1.73 is in the comfortable range most lenders like to see (roughly 1.5 to 3).
The quick ratio of 0.90 says you'd need to sell inventory (or borrow) to cover current bills.
Cash is tied up for about 50.7 days between paying suppliers and collecting from customers — that gap is what working capital funds.
Rules of thumb vary a lot by industry — compare against businesses like yours.

What this does

Working capital is the money you have to run the business day to day: what you'll turn into cash this year, minus what you owe this year. It's the first thing a lender (or a worried owner) looks at.

Put in the current section of your balance sheet and this gives you working capital, the three liquidity ratios, and — with revenue and cost of goods sold — how long your cash is tied up.

How the math works

working capital = current assets − current liabilities
current ratio = current assets ÷ current liabilities

The quick ratio is stricter: it leaves out inventory and prepaids, which you can't pay bills with right away.

quick ratio = (cash + short-term investments + receivables) ÷ current liabilities
cash ratio = (cash + short-term investments) ÷ current liabilities

The cash conversion cycle adds the time dimension:

days to collect = receivables ÷ revenue × 365
days of inventory = inventory ÷ COGS × 365
days to pay = payables ÷ COGS × 365
cycle = collect + inventory − pay

A positive working capital number isn't automatically healthy. If it's all slow-moving inventory, you can still run out of cash.

Check my math: a worked example

$260,000 of current assets against $150,000 of current liabilities.

Working capital: $260,000.00 − $150,000.00 = $110,000.00.
Current ratio: 1.73. Quick ratio: $135,000.00 ÷ $150,000.00 = 0.90. Cash ratio: 0.40.
Days: 30.4 to collect + 67.6 of inventory − 47.3 to pay = a 50.7-day cycle.

These numbers come straight from the calculator using its example inputs — if the math ever changes, this example changes with it.

Mistakes I see a lot

Counting the whole loan balance instead of just the part due in the next 12 months (or leaving that part out entirely).
Counting receivables you'll never collect. Use the net number after your bad-debt allowance.
Treating inventory like cash. The quick ratio exists because you can't pay rent with pallets.
Reading the ratios without the trend. One snapshot can be a seasonal high or low.

Questions people ask

What's a good current ratio?: Around 1.5 to 3 is a common comfort zone, but it depends on the business. A grocery store turns inventory so fast it can run below 1; a manufacturer usually needs more.
How can I improve working capital?: Collect faster (invoice promptly, follow up, take cards), carry less inventory, stretch payables within the terms, or refinance short-term debt into long-term debt.
Should I use average balances for the days figures?: Averages (beginning plus ending, divided by two) are better when balances swing during the year. This uses the balances you enter, so put in averages if you have them.

Assumptions and limits

Everything entered is current: expected to be collected, used up, or paid within a year.
Current ratio = current assets ÷ current liabilities. Quick ratio = (cash + short-term investments + receivables) ÷ current liabilities. Cash ratio = (cash + short-term investments) ÷ current liabilities.
Receivables are taken at what you expect to collect (net of any allowance for bad debts).
Short-term debt includes lines of credit and the current portion of long-term debt.
Days figures use a 365-day year: receivables ÷ revenue, inventory ÷ COGS, and payables ÷ COGS, each × 365. Year-end balances stand in for averages.
Rules of thumb are general; healthy ratios vary a lot by industry.

Ben’s notes on this

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Spot an error?

This is a public notebook and I do make mistakes. If a number looks off, tell me — I fix things and note the change in the changelog.

Disclaimer: Educational and planning use only. Results depend on what you enter and may not match your lender, your tax return, or professional accounting treatment. Informational content + opinions only — not tax/legal advice.

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