Excess Cash Held by a Firm Should Be

question 37

Multiple Choice

Excess cash held by a firm should be:

• A) reinvested by the firm in projects offering the highest rate of return.
• B) reinvested by the firm in projects offering rates of return higher than the cost of capital.
• C) reinvested by the firm in the financial markets.
• D) distributed to bondholders in the form of extra coupon payments.

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Definitions:

Decentralized Decision

A management strategy where decision-making powers are distributed among various levels of the organization rather than being concentrated at the top.

Narrow Span

a management structure where a supervisor oversees a small number of subordinates, allowing for close supervision and control.

Organizational Complexity

relates to the various interconnected components within an organization, including its structure, processes, and dynamics that determine its level of intricacy.

Mechanistic Structure

A highly formal organizational structure characterized by rigid hierarchy, clear divisions of labor, and centralized decision-making.