A decline in the level of working capital will:
A) working capital is not related to risk.
B) reduce risk.
C) increase risk.
D) leave risk unchanged.

Question

Quizplus · Accepted Answer

Working capital is the difference between current assets and current liabilities. If there is a decline in working capital, it means that current assets have decreased, or current liabilities have increased. This situation increases the risk of the company not being able to meet its short-term obligations, such as paying bills or loans. Therefore, a decline in working capital increases the risk.

A Decline in the Level of Working Capital Will