An organization's bond rating may cause the organization to hold larger levels of cash than are necessary for operations.

Question

Quizplus · Accepted Answer

An organization may hold larger levels of cash than necessary to maintain a good bond rating. This is because having a strong cash position can help reassure bondholders and rating agencies of the organization's ability to meet its debt obligations. Therefore, the bond rating can indirectly affect an organization's cash management decisions.

An Organization's Bond Rating May Cause the Organization to Hold