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

Question

Quizplus · Accepted Answer

Working capital is the amount of current assets minus current liabilities and represents the liquidity available to meet short-term obligations. A decline in the level of working capital means there is less liquidity available to meet short-term obligations, which increases the risk of default. Therefore, the correct answer is D.

A Decline in the Level of Working Capital Will