How is negative working capital made?
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kenna
Apprentice
Joined: 14 May 2007
Posts: 1
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 Posted: 08/24/08 - 04:11 Post subject: |
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| Can somebody please explain me the concept of negative working capital? I am trying to understand this concept, but I cannot tell I have been very successful in it. I have even heard that this kind of capital is used for some investments, but I do not really know how. Anybody care to explain? Thanks a lot for your help |
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crystal
Apprentice
Joined: 21 Nov 2007
Posts: 1
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| Posted: 09/22/08 - 23:19 Post subject: |
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| Well, negative working capitals are actually a sign of very efficient managers, I would say. It is not at all that difficult to understand, if you just think about it for a while. Let’s say you own a store, and you order 100 TVs from Sony, making a deal that you are going to sell them in 3 months time. You have them delivered in 10 days and sold to your customers in few days more. Since you do not have to invest that money right away, you can invest it further, and even earn some interest on it, until payment day arrives.I made it quite simple, hope you understood it. |
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