Too little current liability financing reduces profitability, whereas too much of this financing increases the risk of not being able to pay debts as they come due.

Question

Quizplus · Accepted Answer

This statement is true. A balance must be struck between the amount of current liability financing used and profitability versus the risk of not being able to repay debts. Too little financing may lead to missed opportunities for growth and profitability, while too much may result in an inability to pay debts as they come due, which can harm a company's reputation and creditworthiness.

Too Little Current Liability Financing Reduces Profitability, Whereas Too Much