What is working capital. Why working capital negative

Question

Accepted Answer

Working capital is the measure of a company's liquidity and operational efficiency. It represents the difference between current assets and current liabilities.

Working capital is the amount of money available to a company for its day-to-day operations.
It is calculated by subtracting current liabilities from current assets.
Positive working capital indicates that a company has enough assets to cover its short-term liabilities.
Negative working capital means that a company's current liabilities exceed its current assets.
A negative working capital may occur due to factors like excessive debt, poor cash flow management, or inventory management issues.
It can indicate financial distress and may lead to difficulties in paying off debts or meeting short-term obligations.
For example, if a company has $100,000 in current assets and $120,000 in current liabilities, its working capital would be -$20,000.

Accepted Answer

Working capital is the difference between a company's current assets and current liabilities. Working capital can be negative if current liabilities are greater than current assets.

Accepted Answer

All asset except fictitious asset minus current liability.  If current liability is excess the working capital will be negative

What is working capital. Why working capital negative

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