Negative working capital occurs when a company's current liabilities exceed its current assets — meaning the company owes more in short-term obligations than it holds in short-term assets available to meet them. While this sounds alarming, negative working capital can actually be a sign of operational efficiency and business strength in certain industry models. Companies like large retailers and supermarkets — such as D-Mart (Avenue Supermarts) in India — operate with negative working capital because they collect cash from customers immediately (cash-and-carry model) while paying suppliers on extended credit terms, effectively using supplier credit to finance operations. This creates a structural negative working capital position that generates free cash flow rather than consuming it. Conversely, negative working capital in capital-intensive manufacturing or infrastructure companies is often a genuine warning sign of liquidity stress. The interpretation of negative working capital therefore depends critically on the business model and industry context of the company being analysed.
For android only
