The size of the cash buffer depends upon:
A) the ability to easily acquire more inventory
B) the predictability of cash inflows
C) total fixed asset investment
D) the ability to accelerate asset depreciation

Question

Quizplus · Accepted Answer

The size of the cash buffer is primarily determined by the predictability of cash inflows. If cash inflows are unpredictable, the company may need to maintain a larger cash buffer to cover unexpected expenses or shortfalls. The ability to acquire more inventory, total fixed asset investment, and the ability to accelerate asset depreciation may have some impact on cash flow, but they are not the primary factors that determine the size of the cash buffer.

The Size of the Cash Buffer Depends Upon