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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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