Insufficient working capital in any enterprise may also result into 1. Failure to adapt to changes 2. Overcapitalisation 3. Reduced availability of trade and cash discounts 4. Reduced volume of production and sales Select the correct answer:

The correct answer is: D. Both 1 and 4

Insufficient working capital can lead to a number of problems, including:

• Failure to adapt to changes. When a company does not have enough working capital, it may not be able to take advantage of new opportunities or respond to changes in the market. This can lead to lost sales and profits.
• Reduced volume of production and sales. If a company does not have enough working capital, it may not be able to purchase the materials it needs to produce its products or services. This can lead to a reduction in production and sales.
• Increased costs. When a company does not have enough working capital, it may have to borrow money at high interest rates. This can increase the company’s costs and reduce its profits.
• Poor financial performance. Insufficient working capital can lead to a number of financial problems, such as late payments to suppliers, missed loan payments, and bankruptcy.

To avoid these problems, it is important for companies to manage their working capital effectively. This means keeping track of their cash flow, inventory levels, and accounts receivable and payable. Companies should also have a plan in place to deal with unexpected cash shortfalls.

Here are some additional details on each of the options:

1. Failure to adapt to changes. When a company does not have enough working capital, it may not be able to take advantage of new opportunities or respond to changes in the market. For example, if a company needs to invest in new equipment to meet changing customer demands, it may not be able to do so if it does not have the necessary working capital. This can lead to lost sales and profits.
2. Reduced volume of production and sales. If a company does not have enough working capital, it may not be able to purchase the materials it needs to produce its products or services. This can lead to a reduction in production and sales. For example, if a company does not have enough working capital to purchase raw materials, it may have to shut down its production line. This can lead to lost sales and profits.
3. Increased costs. When a company does not have enough working capital, it may have to borrow money at high interest rates. This can increase the company’s costs and reduce its profits. For example, if a company does not have enough working capital to pay its suppliers on time, it may have to borrow money to do so. This can lead to increased interest costs, which can reduce the company’s profits.
4. Poor financial performance. Insufficient working capital can lead to a number of financial problems, such as late payments to suppliers, missed loan payments, and bankruptcy. For example, if a company does not have enough working capital to pay its suppliers on time, it may be at risk of being sued by its suppliers. This can lead to a number of problems, such as damage to the company’s reputation and difficulty in obtaining credit from other suppliers.