Question

Chapter 7: End of Chapter Exercises Homework . Due in 3 days 11/13 answered Unanswered Submit Chapter 7 Review Questions 8 Homework . Unanswered True or False: The cost that companies incur when they set aside capital for losses instead of using it for working capital in the business is the opportunity cost of funds. The capital has a value. If the capital is used in the business, then the value is often more than if it is used for paying losses. The difference between these values (opportunity cost) could affect decisions to self-insure or not. As opportunity costs rise, so does the likelihood that there will be no self-insurance Fullscreen Unanswered

Answer 1

The above statement is true as a higher opportunity cost results in a low amount of money left for working capital and other business purposes. Higher opportunity cost in the business also results in missing out the best available alternative in the business. Thereby, it holds true that higher cost of opportunity in a business would result in low capital left for conducting business activities including insurance.