 Chapter-wise NOTES for CBSE Examination 2024

 2000+ Multiple Choice Questions (MCQs) of 11 Types

 400+ Competency Based Questions
 Pictures and Cartoons Based Questions
 Important Questions for CBSE 2024 Exam (Chapter-wise)
 Important TIPS for CBSE 2024 Exam to Score 100%
 CBSE Sample Question Papers 2023-24 and 2022-23
 20 Sample Papers for Practice with Answers
Competency Based Question from DEY’S Exam Handbook/NOTES and Sample Papers
“Working capital affects both the liquidity as well as profitability
of a business.” Do you agree with the statement? Give reasons
QUESTION

in support of your answer. (3)

Ans. The given statement is correct.
Working capital means investment in current assets, e.g. Cash
in hand/Cash at Bank, Bills receivable, Debtors, Inventory, etc.
• Current assets are expected to get converted into cash
or cash equivalents within a period of one year. Thus,
these assets provide liquidity to the business. Insufficient
investment in current assets may make it more difficult for an
organisation to meet its payment obligations.
• However, Current assets contribute less to the profits than
fixed assets. These assets provide little or low return.
Hence, a balance needs to be struck between liquidity and
profitability.

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