The Level of Cash a Firm Holds Is Irrelevant; It

question 25

True/False

The level of cash a firm holds is irrelevant; it can never be short of cash since a firm is able to raise new money instantly at a fair rate, while it can never have surplus cash since the firm can invest excess cash at a fair rate to earn a net present value (NPV) of zero.

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Definitions:

Tax Authority

The governmental organization responsible for enforcing tax laws and collecting taxes.

Cash Flow

This represents the total amount of money being transferred in and out of a business, especially in terms of operational, investment, and financing activities.

Employees

Employees refer to individuals hired by an organization or company to perform specific duties in exchange for compensation.

Business Owner

An individual who owns and operates a business entity, assuming all risks and rewards of the venture.