In general, the more net working capital a company has
A) the greater the risk.
B) the lower the risk.
C) the less likely creditors will lend to the firm.
D) the lower its profits

Question

Quizplus · Accepted Answer

Net working capital represents a company's liquidity and ability to pay its short-term debts. The more net working capital a company has, the lower the risk it poses to creditors and investors because it can more easily meet its financial obligations. Therefore, option B is correct. Option A is incorrect because higher net working capital does not necessarily indicate higher risk. Option C is incorrect because a company with substantial net working capital signals its ability to service its debt, making it more likely to secure new lending. Option D is incorrect because net working capital does not directly impact a company's profitability.

In General, the More Net Working Capital a Company Has