In regards to the Miller-Orr Model, The greater the variance of the cash ﬂows, the greater the
distance between the target balance and the minimum balance.

Question

Quizplus · Accepted Answer

This is true according to the Miller-Orr Model, as a greater variance of cash flows will result in a wider "safety band" between the target balance and minimum balance, meaning the company will need to hold more cash to avoid dipping below the minimum balance.

In Regards to the Miller-Orr Model, the Greater the Variance