A firm that does not invest effectively will:

Question

Quizplus · Accepted Answer

A firm that does not invest effectively will have a lower return on investment, which will lead to a lower profitability and cash flow. This will make it more risky for investors, and therefore increase its cost of capital. Higher cost of capital will make it more difficult for the firm to raise funds in the future, and reduce its ability to invest effectively. However, it will not find itself at a competitive advantage, make itself more attractive in the short run, or increase its market prices of debt and equity securities.

A Firm That Does Not Invest Effectively Will