Working Capital Formula | How to Calculate Working Capital (with Example)

In this video on Working Capital formula, we will look at how you can find out the Working Capital formula of a company.

𝐖𝐨𝐫𝐤𝐢𝐧𝐠 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐟𝐨𝐫𝐦𝐮𝐥𝐚
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This is one of the most common concepts every business owner should understand.

Each and every investor must know how to find how liquid a firm is at any given moment of time.

Below is the formula Working Capital.

Working Capital = Current Assets - Current Liabilities

𝐖𝐨𝐫𝐤𝐢𝐧𝐠 𝐂𝐚𝐩𝐢𝐭𝐚𝐥 𝐄𝐱𝐚𝐦𝐩𝐥𝐞
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Shield Company has the following information

Current Assets –

Accounts Receivables – $60,000
Cash – $25,000
Inventories – $54,000
Marketable Securities – $55,000
Prepaid Expenses – $6000

Current Liabilities –

Accounts Payables – $45,000
Notes Payables – $25,000
Accrued Expenses – $22,000
Short term debt – $44,000

Now we need to find out the Working Capital of Shield Company

Total Current Assets = ($60,000 + $25,000 + $54,000 + $55,000 + $6000) = 200000

Total Current Liabilities = ($45,000 + $25,000 + $22,000 + $44,000) = 136000

By using Working Capital Formula, we get

WC = Current Assets - Current Liabilities

= 200000 - 136000 = 64000

Working Capital = 64000

[arbistadjatacaetano]

wauuu, how was it so easy for me to understand from this video. I'm satisfied 👍👌👏👏👏

[santoshkumar-bzot]

Some companies will receive payments after 30 days, 50 days etc.. how will they calculate on future receipts? Any accrual will they post?