Financial slack:
A) is associated with high leverage
B) allows firms to take advantage of good investment opportunities
C) solves any agency costs when managers want to empire-build
D) is a term that describes a lazy CFO

Question

Quizplus · Accepted Answer

Financial slack refers to the excess financial resources that a firm has, which can be used to invest in new projects or take advantage of good investment opportunities. It is not necessarily associated with high leverage, and it does not solve agency costs. The notion that financial slack is indicative of a lazy CFO is incorrect.

Financial Slack