Which of the Following Statements Is NOT True

question 77

Multiple Choice

Which of the following statements is NOT true?

• A) If cash balances become too small, it may lead the firm to bankruptcy.
• B) The lower the cash balance, the better the ability of a firm to meet its short-term financial obligations.
• C) The level of the cash balance has no bearing on a firm's ability to meet its short-term financial obligations.
• D) The downside of holding too much cash is that the returns on cash are low.

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Definitions:

Common Stocks

Shares representing ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends and/or capital appreciation.

Retained Earnings

Represents the portion of a company's profits not distributed as dividends to shareholders but instead reinvested in the business.

Free Cash Flow

This is a financial performance measure that shows how much cash a company generates after accounting for cash outflows to support operations and maintain its capital assets.

Management Bonuses

Additional compensation awarded to executives and managers, often tied to performance metrics such as company profitability or achievement of specific goals.