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The Tradeoff Between

Profitability & Risk (cont.)

Negative Net Working Capital (high return and high risk)

Current C rrent
low Assets Liabilities
return low
Net Working
cost
Capital<0

high Long-Term high


return Debt cost

Fixed highest
cost
Assets Equity
Copynight 2009 Pearson Prentice Hall All rights reserved. 14-7

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