alleryStart learning →Negative net working capital means the current liabilities are:
AEqual to the assets
BAbsent from the books
CGreater than assets
DSmaller than assets
Answer & Solution
Correct answer: C. Greater than assets
1. Net working capital is assets minus liabilities.
2. A negative result means the subtraction went past zero.
3. Negative net working capital means current liabilities are greater than current assets.
4. The company could not cover its obligations from current assets alone.
_Source: OpenStax Principles of Finance (CC BY 4.0), Ch 19 'The Importance of Trade Credit and Working Capital in Planning', sections 19.1-19.5_
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