True, False, or Uncertain: Managers should try to maintain the highest level of
liquidity that they possibly can in order to insure the firm has maximum financial
flexibility. Explain.

Question

Quizplus · Accepted Answer

Liquidity--and financial flexibility--comes at a cost. The most liquid investments also earn a lower return than less liquid investments, so you have to do a cost-benefit analysis to decide what level of liquidity is appropriate for your firm. Too much liquidity can be as bad as too little liquidity.

True, False, or Uncertain: Managers Should Try to Maintain the Highest