What is the optimal amount of cash a firm should hold?
A)As much as possible
B)Just enough to pay for purchases
C)Enough to be liquid
D)None

Question

Quizplus · Accepted Answer

The optimal amount of cash a firm should hold is enough to be liquid, meaning it can pay for its operating expenses and short-term obligations. Holding too much cash can be inefficient, as it may not earn a return or may be subject to theft or loss. Conversely, holding too little cash can lead to missed opportunities or inability to meet obligations. Therefore, a balance should be struck between having enough cash to be liquid and not holding excessive amounts.

What Is the Optimal Amount of Cash a Firm Should