What current ratio should I aim for?

Around 1.5 to 2 is a common comfort zone, but it varies enormously by industry. A supermarket runs happily below 1 because it collects cash before paying suppliers.

Businessfinance

Working Capital Calculator

Working capital with the current and quick ratios. The quick ratio removes inventory, on the view that stock you cannot sell in a hurry is not much use when a bill falls due.

Also called: current ratio calculator, quick ratio.

Working capital

₹20,00,000

₹20,00,000 of working capital, a current ratio of 1.67. Stripping out inventory gives a quick ratio of 1.17, which is the tougher test.

Current ratio

1.67

Quick ratio

1.17

Working capital as a share of assets

40%

How it reads

Comfortable cover for short-term obligations.

How this is calculated

An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.

Method and background

How this is calculated

Working capital is what is left of short-term assets after short-term obligations, and it is the buffer a business runs on. The current ratio expresses the same thing as a multiple, and the quick ratio repeats it without inventory. The gap between the two ratios is a measure of how much of the buffer depends on selling stock, which is exactly the assumption that fails in a downturn.

working capital = current assets - current liabilities

CA: Current assets (currency)
CL: Current liabilities (currency)

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

a comfortable position

Current assets: ₹50,00,000
Current liabilities: ₹30,00,000
Of which inventory: ₹15,00,000

Working capital₹20,00,000

Worked by hand; the gap between the ratios is the inventory

Open this example

liabilities above assets is negative working capital

Current assets: ₹20,00,000
Current liabilities: ₹30,00,000
Of which inventory: ₹0

Working capital-₹10,00,000

boundary

Open this example

no liabilities makes the ratios undefined rather than infinite

Current assets: ₹50,00,000
Current liabilities: ₹0
Of which inventory: ₹0

Working capital₹50,00,000

degenerate case: the guarded denominator

Open this example

Method and limits

What it assumes

Current means realisable or payable within a year.

What it deliberately does not model

Very high working capital is not automatically good: it can mean cash sitting idle or receivables not being collected.
Seasonal businesses show wildly different figures depending on the date.

Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator

Frequently asked questions

What current ratio should I aim for?: Around 1.5 to 2 is a common comfort zone, but it varies enormously by industry. A supermarket runs happily below 1 because it collects cash before paying suppliers.