If a fiRm Maintains a Relatively High Level of Investments

question 165

Multiple Choice

If a firm maintains a relatively high level of investments in cash and marketable securities, which of the following statements is true?

• A) The firm is probably following a restrictive short-term financial policy.
• B) The firm adds little to shareholder wealth by making these types of investments.
• C) The chances of the firm facing financial distress are increased by this policy.
• D) The firm likely faces a relatively high level of shortage costs.
• E) The firm faces a relatively low level of opportunity costs.

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Definitions:

Graph Equations

The process of plotting the solutions to an equation on a graph, typically within a coordinate system.

System of Equations

A set of two or more equations with the same set of variables, which are solved simultaneously to find common solutions.

Hyperbola

A type of smooth curve lying in a plane, consisting of two branches, which are mirror images of each other and resemble two infinite bows.

Center and Vertices

In geometry, the central point of a shape and the points that define its outermost corners or parameters, especially in polygons and ellipses.