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    Question

    The primary objective of Working Capital Management is

    to:
    A Maximize the value of fixed assets Correct Answer Incorrect Answer
    B Ensure high profitability at any cost Correct Answer Incorrect Answer
    C Achieve a balance between profitability and risk Correct Answer Incorrect Answer
    D Minimize the cost of capital Correct Answer Incorrect Answer
    E Maximize the current ratio Correct Answer Incorrect Answer

    Solution

    The goal of working capital management is to manage current assets and liabilities to ensure a company can continue its operations (liquidity) while maximizing its return on assets (profitability). An overly conservative approach (e.g., holding too much cash) reduces risk but also profitability. An overly aggressive approach (e.g., minimal inventory) increases profitability but also the risk of stock-outs and operational halts. Therefore, the key is to strike a balance.

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