Question

Higher liquidity often leads to idle cash reserves, which reduces profitability.

True
False

Answers

GPT-4o mini
True. Higher liquidity can mean that a company has more cash on hand or easily convertible assets, which may lead to idle cash reserves. When cash is not invested or used productively, it can reduce overall profitability, as those funds could have been used for investments, expansion, or other opportunities that generate returns.

Related Questions