Which of the following is true regarding the cash management model in Figure 20.5?

Question

Quizplus · Accepted Answer

The cash management model in Figure 20.5 is based on finding the optimal point where the sum of interest costs and transaction costs is minimized. This point is called the return point and it is located where the marginal transaction cost equals the marginal interest cost. The model assumes that cash flows are unpredictable and the goal is to find a balance between holding too much or too little cash. The model does not focus on minimizing the number of transactions but rather on finding the point where the costs are minimized. Therefore, option D is the correct choice.

Which of the Following Is True Regarding the Cash Management