Firms that are not highly capital intensive tend to be more risky than similar firms that use less fixed assets.

Question

Quizplus · Accepted Answer

Firms that are highly capital intensive have a significant portion of their total assets tied up in fixed assets such as property, plant, and equipment. These fixed assets serve as collateral for loans and provide a measure of stability to the firm's financial position, making them less risky. On the other hand, firms that are not highly capital intensive, such as service-based firms, may have lower fixed costs, but they are more exposed to changes in market demand and competition, which could make them more risky. Therefore, the statement is false.

Firms That Are Not Highly Capital Intensive Tend to Be