The conservative strategy is less profitable than the aggressive approach because it requires the firm to pay interest on unneeded funds.

Question

Quizplus · Accepted Answer

The conservative strategy involves holding excess cash and keeping it in low-risk, low-return investments. While this approach minimizes financial risk, it also means the firm is not maximizing profits by investing in higher-risk, higher-return projects. Additionally, the firm may need to pay interest on the idle cash, which further reduces potential profits.

The Conservative Strategy Is Less Profitable Than the Aggressive Approach