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Operating Cash Flow and Net Working Capital

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Please help answer the following questions:

1) Operating Cash Flow. Suppose a company's operating cash flow was negative for several years running. Is this necessarily a good sign or a bad sign?

2) Net Working Capital and Capital Spending. Could a company's change in NWC be negative in a given year? (Hint: Yes.) Explain how this might come about. What about net capital spending?

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Solution Summary

This solution identifies net working capital and capital spending. It also discusses a negative change in a company's NWC. The answers are provided in 277 words.

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1) Operating Cash Flow. Suppose a company's operating cash flow was negative for several years running. Is this necessarily a good sign or a bad sign?

"Cash flow from operating activities is a section of the cash flow statement that provides information regarding the cash-generating abilities of a company's core activities. "1Operating cash flow represents the efficiency of the operations. If the organization is having higher operating cash flow then it indicates better ...

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