When a firm has excessive cash, managers may make use of the funds in an inefficient manner. This is also referred to as the ________ cost of retaining cash.
A)interest
B)fixed
C)special
D)agency

Question

Quizplus · Accepted Answer

The excessive cash may lead to agency problems where managers may make use of the funds in an inefficient manner, resulting in the agency cost of retaining cash. A and B are not relevant in this context, and special cost is not a commonly used term in finance.

When a Firm Has Excessive Cash, Managers May Make Use