SELECT * FROM question_mgmt as q WHERE id=5261 AND status=1 SELECT id,question_no,question,chapter FROM question_mgmt as q WHERE courseId=3 AND subId=20 AND chapterId=598 and ex_no='2' AND status=1 ORDER BY CAST(question_no AS UNSIGNED) CBSE Free NCERT Solution of 12th business-studies Financial Management how does working capital affect both the liquidity

Question:

How does working capital affect both the liquidity as well as profitability of a business?

Answer:

Working capital means the portion of capital which is invested in current assets. This investment facilitates smooth day-to-day operations of the business. It affects both the profitability as well as liquidity of a business.

  • The increase in current assets will provides more liquidity to the business but it affects the profitability because these assets provide little or low return.

  • If there is low working capital it will affect the liquidity of the business which leads to create problem or disturb in day to day operations of the business.


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