What determines the optimum amount of cash a firm should hold?
A)The motives for the use of the cash
B)The firm's borrowing capacity
C)a and b
D)None of the above determines the optimum amount of cash a firm should hold

Question

Quizplus · Accepted Answer

The optimum amount of cash a firm should hold is determined by both the motives for the use of the cash, such as investing in new projects or paying dividends, as well as the firm's borrowing capacity, which determines how much cash the firm can afford to hold without sacrificing other investment opportunities. Therefore, both options A and B are important factors in determining the optimal cash balance for a firm.

What Determines the Optimum Amount of Cash a Firm Should