In working capital management, risk is measured by the probability that a firm will become
A) liquid.
B) technically insolvent.
C) unable to meet long-term obligations.
D) less profitable.

Question

Quizplus · Accepted Answer

In working capital management, risk is measured by the probability that a firm will become technically insolvent, meaning it is unable to pay its debts as they come due. This is the most immediate risk to a company's financial health and can lead to bankruptcy if not managed properly. While the other options (becoming liquid, unable to meet long-term obligations, and being less profitable) are also concerns for a company, they are not necessarily indicative of immediate risk to its solvency.

In Working Capital Management, Risk Is Measured by the Probability