The target cash balance for a firm that follows a flexible cash management policy is the point at which ____________.

Question

Quizplus · Accepted Answer

The target cash balance for a firm that follows a flexible cash management policy is determined at the point where opportunity costs (the costs of holding too little cash, such as lost investment income) are equal to trading costs (the costs associated with converting marketable securities to cash). This balance minimizes total costs associated with managing cash.

The Target Cash Balance for a Firm That Follows a Flexible