Holding all other factors constant, if a firm increases its current assets relative to total assets,
A) it increases return and reduces risk.
B) it increases return and increases risk.
C) it reduces return and reduces risk.
D) it reduces return and increases risk.

Question

Quizplus · Accepted Answer

Increasing current assets relative to total assets generally means the firm is investing more in assets that are less risky but also offer lower returns, such as cash or short-term investments, thus reducing both return and risk.

Holding All Other Factors Constant, If a Firm Increases Its