Question

Negative working capital for a firm implies that

		current assets are partially financed by long-term financing
		fixed assets are partially financed by current liabilities
		fixed assets are completely financed by current liabilities
		firm has no short-term debt

Answer 1

Ans fixed assets are completely financed by current liabilities

Negative working capital for a firm implies that fixed assets are completely financed by current liabilities.

Net working capital = Current assets - Current liabilities.

When Fixed assets are completely finance by current liabilities then current liabilities increase but there is no impact on current assets. Ultimately Net working capital moves into negative figure.