The risk-return trade-off in managing a firm's working capital involves which of the following?
A) a trade-off between liquidity and activity
B) a trade-off between debt and equity
C) a trade-off between the firm's liquidity and its profitability
D) none of the above

Question

Quizplus · Accepted Answer

The risk-return trade-off in managing a firm's working capital involves a trade-off between the firm's liquidity and its profitability. High liquidity means having more cash or easily convertible assets, which is safer but yields lower returns. Lower liquidity can lead to higher returns but increases risk.

The Risk-Return Trade-Off in Managing a Firm's Working Capital Involves