Within the Context of Working Capital Management, the Risk-Return Trade-Off

question 9

True/False

Within the context of working capital management, the risk-return trade-off involves an increased risk of illiquidity versus increased profitability.

---

Definitions:

Current Liabilities

Debts or obligations that are due to be paid within one year or within the normal operating cycle of the business, whichever is longer.

Accounts Receivable

Money owed to a business by its customers for goods or services that have been delivered but not yet paid for.

Rate of Return on Investment

A measure of the profitability and efficiency of an investment, calculated by dividing the investment's gain by its cost.

Owners' Equity

refers to the owner's interest in the assets of a business after all liabilities have been deducted.