Higher liquidity (holding larger cash and marketable securities balances)generally results in a lower return on equity.

Question

Quizplus · Accepted Answer

Holding larger cash and marketable securities balances may lead to a lower return on equity because these assets generally earn lower returns compared to investing in more profitable ventures. Additionally, holding higher levels of liquidity may indicate a lack of investment opportunities or inefficient use of assets, which can also contribute to a lower return on equity.

Higher Liquidity (Holding Larger Cash and Marketable Securities Balances)generally Results