A major reason that companies hold short-term assets is because markets are not frictionless.

Question

Quizplus · Accepted Answer

Companies hold short-term assets such as cash, marketable securities, and inventory to hedge against risks and uncertainties in the market. Markets are not always efficient, and there may be frictions such as transaction costs, information asymmetry, and liquidity issues that can affect asset prices and cause uncertainties. Thus, holding short-term assets provides companies with flexibility and liquidity to manage their operations and investments amid changing market conditions.

A Major Reason That Companies Hold Short-Term Assets Is Because