Small companies in relatively high-risk industries are more likely to hold large cash surpluses.

Question

Quizplus · Accepted Answer

Small companies in high-risk industries are more likely to hold large cash surpluses as a precautionary measure against unexpected events such as economic downturns, industry-specific risks, and potential business interruptions. This cash reserve provides a cushion to help the company weather difficult times and avoid bankruptcy. Additionally, small companies may find it more challenging to obtain external financing, making it even more crucial for them to hold onto their cash reserves.

Small Companies in Relatively High-Risk Industries Are More Likely to Hold