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purchasing marketable securities with excess cash

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1. What are two problems that may be caused by too much working capital, and what are two problems that may be caused by too little working capital?
2. What are the relative advantages and disadvantages of a conservative asset financing policy and an aggressive asset financing policy?
3. What potential risks might there be in purchasing marketable securities with excess cash?

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Solution Summary

The solution discusses the potential risks there might be in purchasing marketable securities with excess cash.

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The problem with too much working capital is that firm will be idle cash which cannot be put to any use. Thus, the firm will not be able to make efficient utilization of funds and its return on investment will be low. Organization may be tempted to use such ...

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Sandeep Bardia, MBA
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  • BCom, SGTB Khalsa College, University of Delhi
  • MBA, Rochester Institute of Technology
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