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.
E)none of above are correct

Question

Quizplus · Accepted Answer

Increasing current assets relative to total assets typically reduces return because current assets generally yield lower returns than fixed assets. It also reduces risk because current assets are more liquid and can be converted to cash more easily, providing a buffer against financial difficulties.

Holding All Other Factors Constant, If a Firm Increases Its