Negative working capital is not always negative

Working capital means the amount of money a business needs to meet its near-term obligations, i.e., money for running its business, short-term debt, etc. It is defined as the difference between a company's current assets and current liabilities. Working capital = Current assets - Current liabilities So if a company has high near-term liabilities, it will have less capital available to run its business. Sounds simple enough. So why should any investor put their money on a company with negative working capital? Because in investing, dealing in absolutes is never a wise call. While it is true that negative working capital should invite more vigilance from investors, some businesses actually fare better when their working capital is in the red. Take the example of consumer-facing companies like Devyani International, which operates Pizza Hut

This article was originally published on December 28, 2022.