Negative Operating Cash Flow / working capital

Question 1

What is negative operating cash flow? (3)

Answer 1

• operating costs are higher than revenue generated
• company is making a loss
• would lead to liquidation
• in the long term

Question 2

What is negative working capital? (3)

Answer 2

• current liabilities are higher than current assets
• financing from creditors to meet day to day costs
• if credit dries up then will go into liquidation