Matching :
-A firm holding an emergency fund in a low interest-bearing account when the funds could have been invested in a project offering a higher return would result in a/an _________________ to the firm.
A) present value
B) third-party administrator
C) net present value
D) opportunity cost
E) risk management policy

Question

Quizplus · Accepted Answer

Opportunity cost refers to the loss of potential gain from other alternatives when one alternative is chosen. In this case, choosing to hold funds in a low interest-bearing account instead of investing in a higher-return project represents a lost opportunity for greater earnings, hence an opportunity cost to the firm.

Matching : -A Firm Holding an Emergency Fund in a Low Interest-Bearing