Practicing Success

Target Exam

CUET

Subject

Business Studies

Chapter

Financial Management

Question:
Higher working capital usually results in:
Options:
Higher equity, lower risk, and lower profits
Lower current ratio, higher risk, and profits
Lower equity, lower risk, and higher profits
Higher current ratio, higher risk, and higher profits
Correct Answer:
Higher current ratio, higher risk, and higher profits
Explanation:
A higher working capital means more funds are required to meet the short term needs. This will be result in more current assets which will mean higher current ratio. Thus, option 4 is correct.