Working capitals are amount of money you need to keep ready to meet day-to-day operating expenses like inventory purchase, and short-term liabilities like accounts payable. This is the remaining current assets after paying off all the current liabilities. If you have adequate level of working capital available in your business you can find an easy escape from trouble situations. Using ACalculator, you will not only be informed about the current amount of working capital but also the required amount of working capital for the next year.
Your expected rate of annual growth.
Total current assets
Cash plus total value of assets (i.e. accounts receivable, prepaid expense etc.) that can easily be liquidated for cash.
Total current liabilities
Accounts payable, wages payable, salaries payable and other liabilities that will be paid in immediate future.
Current ratio is calculated as current assets divided by current liabilities. This financial ratio is good at describing your ability to meet the short term obligations. This ratio indicates your ability to meet your day to day expenses. As per the rule of thumb, it’s the best possible practice to maintain a current ratio of 2.0.
Working capital is the difference of current assets and current liabilities of your business. It is good to keep working capital at moderate level as there is no rule of thumb regarding the size of working capital. Whatever, if you want to find out your targeted amount of working capital using the ‘Current Ratio’.