Question

explain the working capital affecting both the liquidity or profitability of a business??​

Answer 1

Working capital of a business refers to the excess of current assets (such as cash in hand, debtors, stock, etc.) over current liabilities. Working capital affects both the liquidity as well as profitability of a business. As the amount of working capital increases, the liquidity of the business increases.

Answer 2

hey!!.

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Answer:-

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under this types of situations are harmful:-

because If the amount of working capital is more than required. it will no doubt increase liquidity but decrease profitability.

if the amount of cash and other current assets are very less then they faces lot of difficulties in meeting daily expenses.

so we can say that amount of both current assets and current liabilities should be determined.

so,that profitability of the business remains good and no fall in liquidity.

hope.it will help u!!