A potential risk of a company with a high ratio of cash to noncash assets is:
A)Creditors are less likely to lend money to the company.
B)Management may not foresee any growth opportunities.
C)The company likely will not be able to pay dividends in the near future.

Question

Quizplus · Accepted Answer

A high ratio of cash to noncash assets may indicate that the company is not investing in growth opportunities and instead hoarding cash. This can be a potential risk because it may lead to stagnant growth and decrease in future profitability. However, it does not necessarily impact the likelihood of getting loans or paying dividends.

A Potential Risk of a Company with a High Ratio