Negative working capital ((See Chapters 11 and 12 of the Vernimmen))

The operating cycles of companies with negative working capital are such that, thanks to a favourable timing mismatch, they collect funds prior to disbursing certain payments. There are two basic scenarios: 1) supplier credit is much greater than inventory turnover (see days’ inventory ratio), while at the same time, customers pay quickly, in some cases in cash; 2) customers pay in advance. A low or negative working capital is a boon to a company looking to expand without recourse to external capital. Efficient companies, in particular in mass-market retailing, all benefit from low or negative working capital.