What are the reasons of negative working capital?

Negative working capital occurs when a company's current liabilities exceed its current assets, indicating potential liquidity issues. Common reasons include inefficient inventory management, slow accounts receivable collections, or high short-term debt levels. It can also arise in industries with rapid turnover, where companies operate on tight cash flows. While it can signal financial distress, some businesses, particularly in retail, may strategically maintain negative working capital to optimize cash flow.