Okay, maybe I’m missing something, but I thought having less current assets than liabilities was bad for a company. Why would any business ever want to operate like that on purpose? Isn’t that like digging yourself into a cash flow hole?
You’re definitely not the only one scratching your head over that—it seems counterintuitive at first. But in certain models, especially retail or fast-turnover businesses, operating with negative working capital can actually be a sign of efficiency. It means the company is getting paid by customers before it has to pay suppliers, freeing up internal cash flow for reinvestment. It’s risky if poorly managed, but when done right, it can strengthen operations instead of straining them.
Honestly, supply chain timing can make or break a business. Even small tweaks in how you manage receivables and payables can have a major impact on your liquidity.
