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Which of the following is a basic principle of finance as it relates to the management of working capital?

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Which of the following is a basic principle of finance as it relates to the management of working capital?
  • AProfitability varies inversely with risk
  • BLiquidity moves together with risk
  • CProfitability moves together with risk
  • DProfitability moves together with liquidity
Correct answer: C
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Profitability moves together with risk

Profitability moves together with risk is a basic principle of finance as it relates to the management of working capital. Profitability is ability of a company to use its resources to generate revenues in excess of its expenses.