what are the negative effects of a company being over capitalised?
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FMWORKING CAPITAL MANAGEMENT
10y ago#1I do suggest that you watch our free lectures, because this is explained!
(Our lectures are a complete course for Paper F9 and cover everything needed to pass the exam well).
If a company is over-capitalised then they will be paying more interest on the capital than they need to. Alternatively they could use the money invested in the excess working capital to buy more non-current assets, and it is the non-current assets that create the profits, not the working capital.
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