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Working Capital Needs Calculator (Canadian)

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.
By changing any value in the following form fields, calculated values are immediately provided for displayed output values. Click the view report button to see all of your results.



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Working Capital Needs Calculator (Canadian)
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**FIG_GRAPHTITLE** Column Graph: Please use the calculator's report to see detailed calculation results in tabular form.

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.

Information and interactive calculators are made available to you only as self-help tools for your independent use and are not intended to provide investment or tax advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. All examples are hypothetical and are for illustrative purposes. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.