If working capital is allowed to increase to an inappropriately high level:

Question

Quizplus · Accepted Answer

When working capital is excessively high, it can indeed reduce the average rate of return on both assets and equity due to the inefficient use of resources. Additionally, there is an opportunity cost associated with having too much working capital, as those funds could have been invested elsewhere to generate a higher return. Therefore, all of the options provided are true consequences of allowing working capital to increase to an inappropriately high level.

If Working Capital Is Allowed to Increase to an Inappropriately