If net working capital became negative, this is considered _____.
A)bad, because it will reduce cash flow
B)good, because entities other than the firm are supplying all of the short-term funding for running the operations of the firm
C)bad, because it makes the current ratio less than one
D)good, because it makes the current ratio greater than one

Question

Quizplus · Accepted Answer

Negative net working capital means that the current liabilities exceed the current assets, which results in a current ratio of less than one. A current ratio of less than one is generally not a good sign as it may indicate that the company may face difficulties in meeting its short-term obligations.

If Net Working Capital Became Negative, This Is Considered _____