Which statement is true? The less liquid assets a firm holds, the less likely it

Question

Which statement is true? The less liquid assets a firm holds, the less likely it is that the firm will experience financial distress. The lower the liquidity ratios, the less liquidity risk a firm has. Extremely high levels of liquidity guard against liquidity crises, but at the cost of lower returns on assets. Liquid assets generate profits for the firm. The less liquid assets a firm holds, the less likely it is that the firm will experience financial distress. The lower the liquidity ratios, the less liquidity risk a firm has. Extremely high levels of liquidity guard against liquidity crises, but at the cost of lower returns on assets. Liquid assets generate profits for the firm. The less liquid assets a firm holds, the less likely it is that the firm will experience financial distress. The lower the liquidity ratios, the less liquidity risk a firm has. Extremely high levels of liquidity guard against liquidity crises, but at the cost of lower returns on assets. Liquid assets generate profits for the firm.

Explanation / Answer

Hi,

Option C (Extremely high levels of liquidity guard against liquidity crises, but at the cost of lower returns on assets.) is correct.

Thanks.

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