Negative Working Capital: $150K Assets, $200K Liabilities
When current liabilities exceed current assets by $50K the business has negative working capital — a serious short-term liquidity risk.
How to use this tool
- Enter your total current assets.
- Enter your total current liabilities.
- Enter the inventory portion of current assets (for the quick ratio).
- Read net working capital, current ratio, quick ratio, and a liquidity verdict.
Negative working capital means the business cannot cover its short-term obligations from current assets alone — common in high-growth companies but a warning sign if persistent.
Frequently asked questions
- What is a good current ratio?
- A current ratio between about 1.5 and 3.0 is often considered healthy, signalling enough liquid assets to cover near-term obligations without excessive idle capital. Below 1.0 is a warning sign; far above 3.0 may mean assets are not being used productively.
- How is the quick ratio different from the current ratio?
- The quick or acid-test ratio removes inventory from current assets before dividing by current liabilities. Because inventory can be slow or costly to sell, the quick ratio is a stricter test of whether you can meet obligations with your most liquid assets.
- Can working capital be negative and still be fine?
- Yes for some business models. Companies that collect from customers before paying suppliers — certain retailers and subscription businesses — can run with negative working capital efficiently. Judge it against your industry and cash-conversion cycle.