What do you mean by negative working capital?

When a company's current liabilities exceed its current assets, it has negative working capital. This means that the liabilities that must be paid within a year exceed the current assets that can be monetized within the same time frame.

Negative working capital in a target is usually viewed negatively by buyers because it represents additional capital that will be required to run the business.

A buyer prefers a working capital ratio of one to 1.5 times, which means that there should be at least one dollar of current assets for every dollar of current liabilities. This assures the buyer that the company will be able to generate enough cash in the short term to cover supplier and payroll obligations.