Answer to Question #222218 in Economics for Nombuso Nxumalo

Question

 Discuss the trade-off between liquidity and profitability

Answer 1

Business will be more profitable when this short- term need of funds is generated by business operation not through external debts. So the liquidity tells about the business capability to meet short-terms need of funds by the business and profitability tells about the profit generated from the operations of business.