alleryStart learning →Why is a longer working capital cycle undesirable for a firm?
ACreditors must be paid sooner
BTax liability rises in proportion
CFixed assets lose value faster
DCapital is tied up earning no return
Answer & Solution
Correct answer: D. Capital is tied up earning no return
A long cycle keeps funds locked in operations that earn nothing during the wait.
Keep practising Working Capital
Browse all Working Capital questions for CA Inter, or explore more Financial Management topics.
Related questions
Single stage inventory calculations look at which scope?Setting a number of days of supply as a coverage target is an example ofWhy should companies keep inventory low when working capital is scarce?Multi-echelon inventory optimization sets stock levelsWhich inventory optimization models use probability distributions for variables?The bullwhip effect in supply chains refers to what?Critics fault the EOQ model mainly for which weakness?Under an all-units discount, price is Rs 50 up to 1,000 units and Rs 45 for 1,001 to 5,000