In working capital management, risk is measured by the probability that a firm will be ________.
A) unable to pay annual dividends to stockholders
B) unable to pay its bills as they come due
C) unable to repay its long-term obligations
D) unable to earn profits from day-to-day operations

Question

Quizplus · Accepted Answer

Risk in working capital management is typically measured by the likelihood that a firm will be unable to pay its bills as they come due. This is because working capital is focused on a company's short-term assets and liabilities, and failing to meet these obligations can lead to serious liquidity and solvency problems. While the other options (unable to pay annual dividends, unable to repay long-term obligations, unable to earn profits) may also be sources of risk for a company, they are not specific to working capital management.

In Working Capital Management, Risk Is Measured by the Probability