Question

Insufficient working capital in any enterprise may also result in _______.
I. Failure to adapt to changes
II. Over-capitalization
III. Reduced availability of trade and cash discounts
IV. Reduced volume of production and sales

• A. I, II and III only
• B. I, III and IV only
• C. II and III only
• D. I and IV only

Answer 1

Answer: (B)

I, III and IV only

• Working capital is the difference between an organization’s current assets and its current liabilities.
  
• Working capital management ensures a company has sufficient liquidity (cash flow) in order to meet its short-term obligations and operating expenses.
  
• A poor and inefficient working capital management leads to tying up of funds in idle assets and reduces the liquidity and profitability of a company.
  
• It thus prevents from failures to adapt to changes, reduced availability of trade and cash discounts, reduced volume of production and sales etc..