Which of the Following Is Most Likely to Occur If

question 19

Multiple Choice

Which of the following is most likely to occur if a firm overinvests in net working capital?

• A)The firm's liquidity will be lower than it should be.
• B)The current ratio will be lower than it should be.
• C)The return on investment will be lower than it should be.
• D)The interest coverage ratio will be lower than it should be.

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Definitions:

Demand Curve

A graphical representation that shows the relationship between the price of a good or service and the quantity demanded by consumers.

Public Goods

Goods that are non-excludable and non-rivalrous, which means that one person's use of the good does not reduce its availability to others, and no one can be effectively excluded from using the good.

Private Philanthropy

Financial contributions or aid given by individuals or private organizations to support various causes and non-profit organizations.

Free-rider Problem

A situation where individuals benefit from resources, goods, or services without paying for them, leading to underprovision of those public goods.