Which firms can maintain a higher portion of their liquidity in marketable securities and less in cash?
A)Firms that have well-developed cash management systems and more predictable cash flows.
B)Firms that have more cash than they need.
C)Firms that have expertise in securities trading.
D)Firms that have volatile cash flows.

Question

Quizplus · Accepted Answer

Firms with well-developed cash management systems and more predictable cash flows are more able to maintain a higher portion of their liquidity in marketable securities and less in cash, as they can better forecast their cash needs and invest their excess funds in securities. This allows them to earn a return on their cash holdings rather than allowing it to sit idle.

Which Firms Can Maintain a Higher Portion of Their Liquidity