Holding All Other Factors Constant, If a Firm Increases Its

question 130

Multiple Choice

Holding all other factors constant, if a firm increases its current assets relative to total assets,

• A)it increases return and reduces riskits financing costs will fall.
• B)it increases return and increases risknet working capital will rise.
• C)has no effect on return and reduces risk.
• D)it reduces return and increases risk.
• E)none of above are correct

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Definitions:

Equity

The value of an ownership interest in property, including shareholders' equity in a corporation, representing assets minus liabilities.

Efficiency

The optimal allocation of resources to maximize the production of goods and services, ensuring that these are distributed in the most effective manner.

Tax Systems

The legal framework and methodologies used by governments to assess and collect taxes from individuals and organizations.

Deadweight Loss

A loss of economic efficiency that can occur when the free market equilibrium for a good or a service is not achieved, leading to a mismatch between supply and demand.