Examine the key reasons why a business may not want to hold too much or too...

Examine the key reasons why a business may not want to hold too much or too little working capital. Provide two (2) examples that illustrate the consequences of either situation.

Expert Solution

business working capital does not want to keep too much or too little working capital as depending

on the cylical natural business the reuirement of working capital may be widely if the firm holded

working capital as per requirement of its peak season demand then there will be surplus working

available for non perfer seasons for with company need to incure extra interest cost

speculation

the company working capital is too high that means its current assets is more than current liabilites

its means even company have a chance to expand its function it is focussing on utilisation of its

resources hences the company growth rate will fall down and it may not reach its target its not for

company

precaution

the company working capital is too low that means its current assets are less than current assets

are less than current liabilites its means company utilisation of its resources is more than assets

hence the company growth rate will fall down and it may not reach its target it is not good for

company

ekkarill92 answered 1 year ago

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