Working Capital Needs

Your working capital is used to pay short-term obligations such as your accounts payable and buying inventory. If your working capital dips too low, you risk running out of cash. Even very profitable businesses can run into trouble if they lose the ability to meet their short-term obligations. The calculator assists you in determining working capital needs for the next year.

WORKING_CAPITAL_CHANGE

To maintain a current ratio of TARGET_CURRENT_RATIO you need a total of TARGET_WORKING_CAPITAL in working capital. Your actual working capital is ACTUAL_WORKING_CAPITAL with a current ratio of ACTUAL_CURRENT_RATIO. If you grow ANNUAL_DESIRED_GROWTH per year in MONTHS_OF_ANALYSIS months you will need TARGET_WORKING_CAPITAL_END of working capital. This will keep your current ratio at TARGET_CURRENT_RATIO. This assumes that both your current liabilities and current assets increase at an annual rate of ANNUAL_DESIRED_GROWTH. **GRAPH**
Results Summary
 ActualsTarget Month 1Target Month MONTHS_OF_ANALYSIS
Current ratio ACTUAL_CURRENT_RATIO TARGET_CURRENT_RATIO TARGET_CURRENT_RATIO
Working capital ACTUAL_WORKING_CAPITALTARGET_WORKING_CAPITALTARGET_WORKING_CAPITAL_END

Input Summary
Total current assets TOTAL_CURRENT_ASSETS
Total current liabilities TOTAL_CURRENT_LIABILITIES
Annual growth rate ANNUAL_DESIRED_GROWTH
Current ratio target TARGET_CURRENT_RATIO

Working capital estimates for the next MONTHS_OF_ANALYSIS months

**REPEATING GROUP**

*Required total assets to meet current ratio target of TARGET_CURRENT_RATIO

Working Capital Needs Definitions

Annual growth
The percent of growth you expect over the next year.
Total current assets
This is any cash or asset that can be quickly turned into cash. This includes prepaid expenses, accounts receivable, most securities and your inventory.
Total current liabilities
This is a liability in the immediate future. This includes wages, taxes and accounts payable.
Current ratio
Current Assets divided by current liabilities. Your current ratio helps you determine if you have enough working capital to meet your short-term financial obligations. A general rule of thumb is to have a current ratio of 2.0. Although this will vary by business and industry, a number above two may indicate a poor use of capital. A current ratio under two may indicate an inability to pay current financial obligations with a measure of safety.
Working capital
Working capital is used by lenders to help gauge the ability for a company to weather difficult financial periods. Working capital is calculated by subtracting current liabilities from current assets. Due to differences in businesses and the fact that working capital is not a ratio but an absolute amount, it is difficult to predict what the ideal amount of working capital would be for your business. To calculate working capital requirements this calculator uses the 'Current Ratio' to determine a target amount of working capital. See the 'Current Ratio' definition for more information.


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