Most companies
A)are not concerned with the management of working capital because cash flows are good.
B)strive for a balance between current assets and current liabilities.
C)try to maintain protection from the creditors by keeping only a small amount of cash available.
D)agree that working capital of $3,000,000 is sufficient for business operations.

Question

Quizplus · Accepted Answer

Most companies strive for a balance between current assets and current liabilities to ensure that they have enough cash and equivalents to cover short-term obligations and invest excess cash in profitable opportunities. This is necessary for efficient working capital management and maximizing profitability. Option A is incorrect because companies should always be concerned with managing working capital, even if cash flows are good, to prevent shortages during unexpected circumstances. Option C is incorrect as companies should maintain an adequate cash balance to meet obligations and emergencies. Option D is incorrect as the amount of working capital required varies based on the business's unique needs and industry.

Most Companies