Which of the following reasons for holding cash is not under the control of management as a matter of policy?
A)Transaction demand
B)Precautionary demand
C)Speculative demand
D)Compensating balances
E)All of these reasons are under the complete control of management.

Question

Quizplus · Accepted Answer

Compensating balances are typically required by lenders as a condition for obtaining loans, and are not under the control of management as a matter of policy. The other reasons for holding cash - transaction demand, precautionary demand, and speculative demand - can be managed and controlled by the company's management.

Which of the Following Reasons for Holding Cash Is Not