Which of the following is not an accurate trade-off relevant to working capital management?
Reducing the risk of illiquidity may decrease profitability.
Short-term debt is repaid or rolled over more often, which may place an undue burden on the firm at a bad time of the year, and its interest rates are less predictable; by contrast, long-term debt is more predictable, less risky, and less profitable.
Firms with few current assets are more liquid than those with more.
A firm makes large investments in cash and marketable securities, which reduces its overall rate of return but protects the firm from risk.