In relation to working capital, what is a potential concern of a ratio greater than 2?

A working capital ratio greater than 2 indicates that the business has twice as many current assets as current liabilities. This suggests strong liquidity; however, one potential concern of such a high ratio is that the business may not be utilizing its assets efficiently. If a significant portion of current assets consists of cash or cash equivalents that aren't being put to productive use—such as investing in opportunities for growth or covering operating expenses—then this indicates that the business might be sitting on excessive idle cash.

Maintaining too high a level of cash can mean missed opportunities for generating returns through investments or operational improvements. A business's goal should not only be to have assets exceed liabilities but also to ensure those assets are being used effectively to generate revenue. Excess cash can indicate a lack of planning or a failure to reinvest in the company, which can hinder overall growth potential.