Answer (C) is correct. A high sales-to-working-capital ratio is usually favorable because working capital, by itself, is an unprofitable use of resources. A firm does not earn money by holding cash, inventory, or receivables. Such assets should be minimized. However, a high ratio of sales to working capital may indicate either very high sales (a good situation) or a low supply of working capital (a potentially bad situation). Thus, a high ratio could indicate that a firm is undercapitalized and does not have the resources to invest in working capital.