How many companies in the S&P 500 have negative working capital? 

151 companies have negative working capital, defined as current liabilities exceeding current assets. Does this mean that they are inherently more risky businesses? Not exactly. 

In my last post, I uncovered how many large companies have negative working capital. This is because one must understand the cause of a company’s negative working capital. 

First, investors focus on operating working capital as opposed to working capital as we care about the internal operations of the business. Any company can increase cash in the short-term by raising debt to boost cash balance, or refinancing existing debt to reduce current debt obligations. So, we should focus on the day-to-day capital requirements to operate the company, which relate to its current operating assets and liabilities. 

As I discuss in the video, negative working capital can arise due to the type of company, its business model, or the industry it operates in. Negative working capital must be assessed on a case by case situation. As discussed, it could create signs of concern for a company such as Bed Bath & Beyond, but not so much for Apple or Kroger.