The combined effects of changes in current assets and current liabilities can be measured by considering them simultaneously. We have shown in the preceding sections the effects of a decrease in the current assets total assets ratio and the effects of an increase in the current liabilities total assets ratio. These changes, when considered independently, lead to an increased profitability coupled with a corresponding increase in risk. The combined effect of these changes should, logically, be to increase overall profitability as also risk and at the same lime decrease NWC.
Combined Effects of Changes in Current Assets and Liabilities of Hypothetical Ltd on Profits and NWC