Which of the following statements is FALSE with regard to working capital management?

Solution

The FALSE statement with regard to working capital management is: “The level of working capital does not affect the smooth working of a firm”. This statement is incorrect. The level of working capital has a significant impact on the smooth working of a firm. Working capital is the measure of a company's short-term liquidity and its ability to meet its current obligations. Insufficient working capital can lead to cash flow problems, inability to pay suppliers or creditors on time, and difficulties in funding day-to-day operations. Adequate working capital is essential for maintaining smooth operations and meeting short-term financial obligations. The other statements are true