Over‑estimation of the required level of assets will
1) cause the firm to acquire excess finance
2) reduce the firm's profitability
3) increase the firm's equity
A)1 and 2
B)1 and 3
C)2 and 3
D)1, 2, and 3

Question

​Over‑estimation of the required level of assets will
1) cause the firm to acquire excess finance
2) reduce the firm's profitability
3) increase the firm's equity
A)​1 and 2
B)​1 and 3
C)​2 and 3
D)​1, 2, and 3

Quizplus · Accepted Answer

Over-estimation of the required level of assets will cause the firm to acquire excess finance, which could lead to unnecessary interest or financing costs, thereby reducing the firm's profitability. It does not directly increase the firm's equity.

​Over‑estimation of the Required Level of Assets Will

Over‑estimation of the Required Level of Assets Will