Negative Accounts Payable Definition
When a company has more liabilities than assets, it is said to have negative equity. In other words, the company owes more money than it is worth. This can happen when a company takes on too much debt, or when its expenses exceed its income.
A negative accounts payable balance occurs when a company owes more money to its creditors than it has in cash. This can happen for several reasons:
1. The company may have made more purchases on credit than it can afford to pay back in the short-term.
2. The company may be experiencing cash flow problems and is unable to pay its creditors on time.
3. The company may be deliberately delaying payment to its creditors in order to improve its own cash position.
A negative accounts payable balance is not necessarily a bad thing. It all depends on the circumstances of the individual company and why the balance is negative. However, if a company consistently has a negative accounts payable balance, it could be a sign of financial trouble and should be investigated further.
