Working Capital Template
Gain valuable insights into a company’s short-term liquidity position and working capital management with our comprehensive Working Capital Template. This free Excel resource walks you through calculating working capital and the working capital cycle using current assets, current liabilities, and key operational metrics.
What is Working Capital?
Working Capital is a measure of a company’s short-term liquidity and its ability to cover upcoming liabilities. It reflects the amount of cash and other current assets a business has available to fund its day-to-day operations and pay off current debts as they become due.
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How to Calculate Working Capital
Working capital is calculated as:
- Current Assets are resources controlled by the company that are expected to provide economic benefits within 12 months, such as Cash, Accounts Receivable, Inventory, and Prepaid Expenses
- Current Liabilities are obligations that are due within 12 months, including Short-Term Debt, Accounts Payable, Accrued Expenses, and Taxes Payable
- By subtracting Current Liabilities from Current Assets, Working Capital shows if a company has enough short-term assets to cover its short-term liabilities
Steps for Using the Working Capital Template
- Download the free Working Capital template
- Enter your company’s Current Asset and Current Liability figures from the balance sheet into the blue input cells
- The template will automatically calculate the Working Capital using the formula: Working Capital = Current Assets – Current Liabilities
- Add company information regarding Sales, COGS, Inventory, Receivables and Payables and the template will automatically calculate Working Capital Days for each
- For the Working Capital Cycle calculation, input the Inventory days, Receivable days, and Payable days for your company or different business segments into the blue cells
- The template will calculate the working capital cycle in days using the formula
- Analyze the output numbers to understand if your company has sufficient liquidity to cover short-term obligations and how efficiently working capital is being managed
- Compare the Working Capital metrics to peers, past performance, and optimal targets for your industry
Understanding the Working Capital Cycle
The working capital cycle looks at how many days working capital is tied up in operations. Key components include:
Inventory days: How long inventory is held before being sold to customers
Receivables days: How long it takes to collect cash from customers
Payables days: How long the company takes to pay suppliers
A shorter working capital cycle is generally better, as it means less capital is tied up in operations. Companies aim to minimize inventory and receivables days while extending payables days as long as possible.