The target cash balance is the minimum cash balance a firm desires to maintain in order to conduct business.

Question

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The target cash balance is the minimum cash balance a firm aims to maintain to ensure that it can meet its financial obligations and conduct business smoothly. It is determined by considering factors such as operating cash flows, capital expenditures, debt repayments, and other cash outflows. Maintaining a target cash balance provides financial stability and allows firms to take advantage of business opportunities, such as acquisitions or investments, when they arise.

The Target Cash Balance Is the Minimum Cash Balance a Firm