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SSC Audit Tax Finance P-II QUESTION #6191
Question 1
A negative 'Net Working Capital' ($NWC$) suggests that the firm:
  • Has high liquidity.
  • May face difficulty meeting short-term obligations.✔️
  • Is using long-term debt to fund current assets.
  • Has no long-term liabilities.
Correct Answer Explanation
$NWC$ is negative when current liabilities exceed current assets, signaling potential liquidity issues [cite: 12, 14].