The motive behind the holding of cash balances to protect the firm from unforeseen cash requirements is known as:

Question

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The motive behind holding cash balances to protect the firm from unforeseen cash requirements is referred to as the precautionary motive. The transaction motive is related to the short-term cash requirements for daily business operations, while the legal motive is related to regulatory requirements to maintain a minimum level of cash reserves. The speculative motive is related to holding cash to take advantage of potential investment opportunities.

The Motive Behind the Holding of Cash Balances to Protect