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      Question

      What financial situation does an entity face if it is

      described as having negative working capital?
      A Its total assets exceed total liabilities. Correct Answer Incorrect Answer
      B It is free of debt. Correct Answer Incorrect Answer
      C Its current liabilities surpass its current assets. Correct Answer Incorrect Answer
      D It holds significant long-term investments. Correct Answer Incorrect Answer
      E Its cash flow is positive. Correct Answer Incorrect Answer

      Solution

      Negative working capital indicates that a company has more short-term financial obligations than assets available to meet those obligations, pointing to potential liquidity issues.

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