A firm increases the risks of insolvency by keeping relatively large amounts of money tied up in marketable securities.

Question

Quizplus · Accepted Answer

Keeping relatively large amounts of money tied up in marketable securities can actually decrease the risks of insolvency by providing a source of liquidity that can be quickly converted into cash to meet financial obligations. However, it may decrease the profitability of the firm as the returns from marketable securities might be lower than other investment options.

A Firm Increases the Risks of Insolvency by Keeping Relatively