Costs that fall with increases in the level of investment in current assets are called:
A) current asset costs.
B) fixed costs.
C) flexible costs.
D) liquid capital costs.
E) shortage costs.

Question

Quizplus · Accepted Answer

Shortage costs decrease as a company invests more in current assets, because having more current assets (like inventory) reduces the chances of running out of stock, which in turn reduces the costs associated with shortages (like lost sales or expedited shipping).

Costs That Fall with Increases in the Level of Investment