A higher working capital turnover most likely indicates: A.Higher operating efficiency. B.Poor liquidity management. C.Lower operating efficiency The answer is A. But could C not be correct as well. Higher working capital ratio could indicate the company has a lot of cash on hand which could be invested in other projects. Waht are your thoughts?
high working capital would be a result of either a high revenue or a low working capital;
neither one can conclude that they have a lot of cash on hand
also even if that were the case, how much a company investing in other projects has no relation to the operating efficiency.
A high Working Capital is not always good because it may mean that you have excess inventory or excess cash which is lying idle.
When Cash is lying idle, it means you are missing on opportunity to earn interest on it.
^ Hint: working capital =/= working capital turnover
^^^ High working capital ratio is no way indicating that the company has a lot of cash on hand