Answer to Question #119601 in Finance for Deep Arpan

Question

Working capital is considered as excess of Current assets over current liabilities but companies
like HUL, Godrej, Bharti airtel, Hero Motorcorp, faces negative working capital in their operating life.
Thus their current liabilities exceed their current assets in some years.
What is your belief in this regard, can working capital ever be negative or Zero for any company? If
yes than what shall be the repercussions if a company has (a) dearth of Working Capital and (b)
overload of Working Capital?

Answer 1

Yes, working capital in an enterprise can be negative or zero. For catering and trade enterprises, this may be the situation, but it is not critical. Minus “turnover” is compensated by an ultrafast operating cycle.

And so the answer

a)