Which of the following could be considered an example of forced reinvestment if the blockage of funds was expected to be temporary?
A) vertical reinvestment by an automobile manufacturer to buy parts suppliers and showrooms
B) a lumber cutting company subsequently builds a paper mill with blocked funds
C) purchase of local money market instruments and short-term loans
D) all of the above

Question

Quizplus · Accepted Answer

Forced reinvestment refers to the situation where a company has to reinvest its funds in a location or asset due to external constraints, rather than because it's the best investment decision. When the blockage of funds is expected to be temporary, investing in liquid, short-term financial instruments like local money market instruments and short-term loans is a typical example of forced reinvestment. This is because these investments can be easily liquidated once the blockage is lifted, unlike the long-term and strategic investments in options A and B.

Which of the Following Could Be Considered an Example of Forced