Working capital: drag current assets
Drag current assets. Bills stay still, so working capital and the current ratio move together. The gap is a subtraction. The ratio is a division. They are one comparison, two writings.
Working capital
$200,000.00
Current ratio
1.50
Bills stay at $400,000.00. Quick ratio 1.10 after $160,000.00 of inventory comes out. Illustrative arithmetic, not a liquidity forecast or advice.
Current liabilities
$400,000.00, held still.
In short
- Drag the bar right for more current assets and a wider dollar gap.
- Drag it left toward the bills, where working capital thins and the current ratio falls toward 1.
- Watch the quick ratio too: inventory is held still, so it comes out of whatever current assets you set.
- Focus the handle and use the arrow keys to step current assets.
A subtraction and a division
How working capital works is the dollar gap. How the current ratio works is the multiple. Working capital against current ratio is the pair. The business ratios calculator prints both.
Inventory is the slowest current asset
How the quick ratio works takes it out. Working capital still includes it. Liquidity is the wider idea.
A gap is not cash
Receivables and stock are not cash until they convert. A firm can print a wide working-capital gap and still be tight.
Common questions
Is a larger gap always safer?
It is more coverage of the bills on this sheet. It can also be stock that will not sell.
Why does the quick ratio move too?
Because inventory is held still. Raising current assets that are not inventory raises quick assets.
Is this a cash forecast?
No. It is one date on a teaching sheet. It is educational material, not advice.
Keep reading
This page is educational material, not financial advice. The figures come from the formula shown and assume the inputs you enter hold for the whole term. Your own rate, fees, taxes and timing will differ, so treat the output as arithmetic to check a decision against, not as a recommendation.