When companies cannot plan for the future and when investors feel they cannot estimate future corporate earnings or interest, inflation, or default rates, they tend to hold cash instead of investing in a new factory or equipment.

Question

Quizplus · Accepted Answer

This behavior is due to uncertainty in the market. When companies and investors cannot predict future economic conditions, they often prefer to hold onto cash as a safeguard against unpredictable risks, rather than commit to new investments that may not yield expected returns.

When Companies Cannot Plan for the Future and When Investors