Why might a company hold low-yielding marketable securities when it could earn a much higher return on operating assets?
♥ 0 |
Why might a company hold low-yielding marketable securities when it could earn a much higher return on operating assets? |
Explanation
The high-yielding marketable securities are short-term less liquid securities. They carry a high interest rate because they carry greater chances of default.
The company does not want to damage its liquidity position, therefore it prefers to hold low-yielding marketable securities even though it gives a lower rate of return.
Verified Answer
The company carry low-yielding marketable securities even after it could earn a much higher return on operating assets because the risk of losing money in low yielding securities is lower compared to volatile markets.
The Best Research Paper Writing Service
Would you want to pay someone to write your paper professionally from scratch? 100% Original and 0% AI Content!.