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:

Positive Economic Profit

The excess amount by which total revenue surpasses the total costs, including opportunity costs of production.

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information.

ATC

Average Total Cost, which is the total cost per unit of output produced, calculated by dividing the total cost by the quantity of output.

Marginal Cost

Marginal cost refers to the additional total cost incurred from the production of an extra unit of a good or service.