Too much investment in current assets reduces profitability, whereas too little investment increasesthe risk of not being able to pay debts as they come due.

Question

Quizplus · Accepted Answer

This statement is true as investing too much in current assets such as inventory, accounts receivable, and cash can tie up a company's resources and reduce profitability. However, investing too little in these assets can increase the risk of not being able to pay debts as they come due. Striking a balance between the two is important for a company's financial health.

Too Much Investment in Current Assets Reduces Profitability, Whereas Too