How to Calculate Working Capital
Working capital is the cushion your business has to fund day-to-day operations — payroll, supplies, and short-term obligations — after covering what’s due within the next year. A second worked example is most useful here because the same formula can land positive or negative depending on how assets and liabilities are structured, and only one of those outcomes is a warning sign.
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Worked examples
Worked Example 1 — Positive Working Capital
A boutique retailer holds $40,000 in cash, $15,000 in receivables, and $60,000 in inventory (total current assets: $115,000). Against this, it owes $70,000 in payables and carries $20,000 in short-term debt (total current liabilities: $90,000). Working capital = $115,000 − $90,000 = $25,000 — a modest but positive cushion.
Worked Example 2 — Negative Working Capital
A manufacturing company holds $200,000 in cash, $180,000 in receivables, and $150,000 in inventory (total current assets: $530,000). Against this, it owes $340,000 in payables and carries $250,000 in short-term debt (total current liabilities: $590,000). Working capital = $530,000 − $590,000 = −$60,000. Despite larger totals on both sides than the retailer above, this business sits in negative territory and may struggle to meet short-term obligations without new financing or faster collections.
Running both scenarios through the same formula shows why the raw dollar totals on each side matter less than the gap between them. Finmap calculates working capital from your connected accounts continuously, so you can see whether that gap is widening or closing well before it becomes a cash crunch.
Track this metric automatically
Finmap calculates it from your connected accounts and shows the trend over time — no spreadsheets to rebuild each month.
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