Working capital calculator: formula, cycle and lender limit

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Three calculators on one page

Start with your balance sheet. The stock, receivables and creditors you enter carry into the cycle and the limit sections, and you can change them there. Every section stays open on the page.

A. From your balance sheet

Stock (inventory) ₹

Receivables (debtors) ₹

Cash and bank balances ₹

Other current assets ₹

Trade creditors ₹

Other current liabilities and provisions ₹

Short-term bank borrowings (cash credit, overdraft) ₹

Used to show working capital with and without bank finance.

Enter stock, receivables and trade creditors to see the figures.

B. Working capital cycle

Annual sales ₹ a year

Annual cost of goods sold ₹ a year

Annual purchases ₹ a year

Leave empty to use the cost of goods sold.

Stock, if different ₹

Leave empty to use the stock from your balance sheet.

Receivables, if different ₹

Leave empty to use the receivables from your balance sheet.

Trade creditors, if different ₹

Leave empty to use the trade creditors from your balance sheet.

Enter annual sales and cost of goods sold, and the stock, receivables and creditors above, to see the cycle.

C. The limit lenders work out

Projected annual turnover ₹ a year

Leave empty to use the annual sales from the cycle section.

Margin on stock and receivables %

Lenders set their own margin. The worked example below assumes 25%. Leave empty to hide drawing power.

Sanctioned cash credit limit, optional ₹

Drawing power cannot go above the sanctioned limit.

Enter a projected turnover, or annual sales above, to see the limit by the turnover method.

The formulas

Working capital formulas and where each comes from

Each line says where the formula comes from. Some are regulator wording. Some are standard accounting definitions, and some are what lenders usually do.

Net working capital formula

current assets − current liabilities

Gross working capital is the current assets alone. Both are standard accounting definitions, and no regulator wording has been tied to them here.

Current ratio

current assets ÷ current liabilities

This follows the RBI's wording of the ratio in its annex of ratios (RBI/2020-21/34).

Working capital cycle formula

stock days + receivable days − payable days

Stock days = stock ÷ cost of goods sold × 365. Receivable days = receivables ÷ sales × 365. Payable days = trade creditors ÷ purchases × 365. The cash tied up is cost of goods sold ÷ 365 × cycle days, an estimate. These are standard accounting definitions. The page adds the unrounded values, so cycle days can differ by 0.1 from adding the rounded ones.

Working capital gap

current assets − (current liabilities − bank borrowings)

This page calls this net working capital before bank borrowings. It shows how much of your working capital the business funds without bank borrowings. It is this calculator's own measure.

The limit lenders may set

at least 20% × projected annual turnover

For small units with limits up to ₹5,00,00,000, a 2019 government reply described a simplified method with a minimum of 20% of projected annual turnover. It is a floor in the method, not a promised limit.

(stock + receivables − creditors) × (1 − margin)

Drawing power in a cash credit account is capped at the sanctioned limit. This formula is bank practice, and the margin differs by lender. The RBI's norms say drawing power comes from a current stock statement not older than three months, and an account with irregular drawings for 90 continuous days becomes a non-performing asset.

Worked example

Worked example: one trading business through all three

This is an example business, not a real file. Balance sheet: stock ₹18,00,000, receivables ₹22,00,000, cash ₹3,00,000, other current assets ₹2,00,000, trade creditors ₹15,00,000, other current liabilities ₹5,00,000, cash credit outstanding ₹10,00,000. For the year: sales ₹1,50,00,000, cost of goods sold ₹1,10,00,000, purchases ₹1,00,00,000.

The example business's balance sheet lines and every result, worked through
Line	Working	Figure
Current assets (gross working capital)	₹18,00,000 + ₹22,00,000 + ₹3,00,000 + ₹2,00,000	₹45,00,000
Current liabilities	₹15,00,000 + ₹5,00,000 + ₹10,00,000	₹30,00,000
Net working capital	₹45,00,000 − ₹30,00,000	₹15,00,000
Current ratio	₹45,00,000 ÷ ₹30,00,000	1.50
Net working capital before bank borrowings	₹45,00,000 − (₹30,00,000 − ₹10,00,000)	₹25,00,000
Stock days	₹18,00,000 ÷ ₹1,10,00,000 × 365	59.7
Receivable days	₹22,00,000 ÷ ₹1,50,00,000 × 365	53.5
Payable days	₹15,00,000 ÷ ₹1,00,00,000 × 365	54.8
Cycle days	59.73 + 53.53 − 54.75, added unrounded	58.5
Cash tied up in the cycle, an estimate	₹1,10,00,000 ÷ 365 × 58.51	₹17,63,333
Working capital turnover ratio	₹1,50,00,000 ÷ ₹15,00,000	10.00
Limit by the turnover method, a minimum	at least 20% × ₹1,50,00,000	at least ₹30,00,000
Drawing power at an assumed 25% margin	(₹18,00,000 + ₹22,00,000 − ₹15,00,000) × 0.75	₹18,75,000, shown as ₹18,70,000
Drawing power with a ₹20,00,000 sanctioned limit	the lower of ₹18,75,000 and ₹20,00,000	₹18,75,000, shown as ₹18,70,000

Reading the results

How to read the results

A current ratio above 1 means current assets exceed current liabilities. A lender looks at more than one ratio.
The limit by the turnover method is a minimum the method sets. The lender decides the actual limit.
Drawing power is what you may actually draw, and it can be lower than the sanctioned limit.
See also the business loan eligibility calculator, the DSCR calculator and the business loan EMI calculator.

What moves it

What changes the answer

Stock days: holding less stock shortens the cycle.
Credit given to customers: collecting faster shortens the cycle. See invoice and bill discounting to shorten the days your money waits.
Credit taken from suppliers: longer supplier credit shortens the cycle.
Seasonality: a business with a busy season may need more working capital for a few months than the year's average suggests.
For the products behind these numbers, see working capital loans and cash credit and overdraft. For a plain-language comparison, read working capital versus a term loan and invoice discounting explained.

Know the limits

Limits of the tool

It uses one balance sheet and one year of sales. It does not model seasonality.
Drawing power uses the margin you enter. Lenders set their own margin, and they treat only some receivables and stock as eligible.
It does not look at your credit history, your bank statements or collateral.

Good to know

Questions and answers

Straight answers on the method, the sources and what the numbers do and do not mean.

What is the formula for working capital?

Net working capital = current assets − current liabilities. Gross working capital is the current assets alone. The current ratio = current assets ÷ current liabilities. The calculator above works out all three from your balance sheet.

What is the net working capital formula?

Net working capital = current assets − current liabilities. Current assets are stock, receivables, cash and bank balances and other current assets. Current liabilities are trade creditors, other current liabilities and provisions, and short-term bank borrowings. In the example, ₹45,00,000 − ₹30,00,000 = ₹15,00,000. Gross working capital is the ₹45,00,000 of current assets.

What is the working capital cycle and how do I calculate it?

The working capital cycle is the number of days between paying suppliers and collecting from customers. Cycle days = stock days + receivable days − payable days. Stock days = stock ÷ cost of goods sold × 365. Receivable days = receivables ÷ sales × 365. Payable days = trade creditors ÷ purchases × 365. In the example the cycle is 58.5 days.

What is the working capital gap?

This page shows one measure under that name: net working capital before bank borrowings, which is current assets minus current liabilities other than short-term bank borrowings. In the example that is ₹25,00,000. It is this calculator's own measure, not a definition taken from a regulator or an institute.

How do lenders calculate working capital limits for small businesses?

For small units with limits up to ₹5,00,00,000, a 2019 government reply described a simplified method that sets the working capital limit at a minimum of 20% of projected annual turnover. On ₹1,50,00,000 of turnover that is at least ₹30,00,000. It is a floor in the method, not a promised limit. The lender decides the actual limit.

What is drawing power in a cash credit account?

Drawing power is the amount a business may draw from a cash credit account. The RBI's norms say it is worked out from a current stock statement. Banks commonly use (eligible stock + eligible receivables − trade creditors) × (1 − margin), capped at the sanctioned limit. That formula is bank practice, and the margin differs by lender. At an assumed 25% margin the example gives ₹18,75,000.

How often do I need to submit a stock statement?

The RBI's norms say the stock statements a lender relies on for drawing power should not be older than three months. Your sanction letter sets the exact schedule for your account.

What is the working capital turnover ratio?

Working capital turnover ratio = sales ÷ net working capital. In the example, ₹1,50,00,000 ÷ ₹15,00,000 = 10.00. It is a standard accounting ratio. This page has not tied it to a regulator or institute definition.

How can I reduce how much working capital my business needs?

Collect from customers faster, hold less stock, or negotiate longer credit from suppliers. Each of these shortens the cycle. Selling invoices to a financier before they are due can also shorten the days your money waits, and lenders decide whether to fund it. None of this is a promise.

Keep going

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Sources

How to read these figures

Capnix is not a lender. Rates, amounts and approvals are decided by lenders. Rates shown here are examples, not offers.

Current ratio: RBI/2020-21/34, 07-Sep-2020, annex of ratios, checked 02-Oct-2026.
Turnover method: Press Information Bureau release of 23-Jul-2019 on a government reply about a simplified computation of working capital for micro and small enterprise units, minimum 20% of projected annual turnover for limits up to ₹5,00,00,000.
Drawing power and stock statements: RBI master circular on income recognition and asset classification norms, 01-Jul-2011, since consolidated into later directions. The drawing power formula is bank practice.
Net working capital, gross working capital, cycle days and the turnover ratio: standard accounting definitions. No regulator wording has been tied to them here.

Last checked: 02-Oct-2026.