When I was in banking working capital was a fun number to look at and it gave me confidence in the customer but more important was ACCESS to working capital.  I had a number of customers who intentionally kept their WC numbers low.  They spent their cash every year on equipment, vehicles, toys, etc.  They also had tremendous equity in their machinery and land and if they had a disaster could always tap into that equity.  They were great borrowers because they almost always had operating line balances!  At the end of the day having a good relationship with your banker and both being on the same page is the most important thing.

Personally, I've gone both ways.  Had lots of cash and lots of term debt on M&E all at the same time.  I finally got tired of making the M&E payments and looking at the interest bills so I paid off my M&E and went negative WC for a short time frame.  Without the M&E payments WC sure does accumulate a lot faster!