What is Working Capital and How to Calculate

Excel Spreadsheets

What is it: working capital is nothing more than the amount of money your business needs to keep running. But how to calculate this amount? Do not worry. There are management tools to facilitate the day to day life of small business owners.

How to: if you just do a working capital calculation from time to time (subtracting operating costs from profit), you will end up with results that are always different. By using a spreadsheet, you will know more clearly how much money you should continue as working capital so that your business stays healthy. The following calculation is called the operational cycle.

Basically, you should take into account every month of the year the company is operating and the average value of what you have in stock, if any.


Then you need to list all accounts receivable. Any and all payments must be included, month by month, including the number of installments in which it will be made.


The next step is to list all accounts payable. This calculation should include the total values ​​and number of installments of any debt that the company has in the year to be calculated. This list includes items such as:

  • Rental of headquarters;
  • Costs with raw material and labor (direct and indirect);
  • Marketing;
  • Equipments;
  • Loans;
  • Legal expenses;
  • Office supplies and cleaning;
  • Water, electricity, telephone (average), internet and insurance.


Anything that can withdraw money from the company should be listed. Lastly, what lacks the cash you get to cover expenses is the required working capital, corresponding to the purple line in the example chart.

What is Working Capital and How to Calculate 1

Most companies can not finance the operating cycle alone. In this case, working capital financing is required. This is often because companies need short-term working capital at some point in their operations. For example: make the stock of Christmas in September, when sales are still low.

To find out if your company will be able to walk on its own legs or need a working capital financing, it is essential to do the calculation that we show here. If you prefer, use the Sheet Cash Flow that LUZ has prepared and obtain this result in a faster and easier way!

Excel Spreadsheets


  1. Hi Ricardo!

    It's OK? Actually, the spreadsheet does not exactly calculate the working capital, but rather the cash requirement. It can be seen on the Consolidated Results tab and is nothing more than the sum of accounts payable and receivable in a given period, okay?


  2. Friend, good morning!

    How is the required working capital amount calculated within the 3.0 cash flow worksheet?

    In what part of the worksheet does this calculation appear (numerically and graphically)?


Please, write your comment
Please enter your name