Firms with the most profitable investment opportunities are willing and able to pay the most for capital, so they tend to attract it away from less efficient firms or from those whose products are not in demand.

Question

Quizplus · Accepted Answer

This statement is true because firms with profitable investment opportunities have the potential to generate higher returns on investment, making them more attractive to investors looking for a reliable source of income. As such, these firms are more likely to be able to secure capital at a lower cost and use it to fund further growth and expansion, while less efficient firms or those whose products are not in demand may struggle to attract investment and could ultimately lose out in the competition for capital.

Firms with the Most Profitable Investment Opportunities Are Willing and Able