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Content: Negative working capitalmeans that the business currently is unable to meet its short-term liabilities with its current assets. Therefore, an immediate increase in sales or additional capital into the company is necessary in order to continue its operations. Working capital also gives an idea of company's efficiency. Money tied up in inventory or accounts receivable cannot pay off any of the company's short term financial obligations. Therefore, working capital analysis is very important, but very complex too. For example, an increase in working capital can be explained by sales increase, but can also be explained by slow collection or inadequate increase in inventory. Working Capital management
Working capital managementrefers to the decisions relating to working capital and short-term financing. The goal of working capital management is to ensure that the company is able to continue its operations and that it has sufficient cash flow to satisfy the short-term debt and operating expenses. These involve managing the current assets and the current liabilities of the company. Most common policies and techniques for the management of working capital are: