Two of the primary motives for a firm to hold cash are the transaction motive and the precautionary motive.

Question

Quizplus · Accepted Answer

The transaction motive refers to the need for cash to facilitate day-to-day transactions such as paying suppliers or employees. The precautionary motive refers to the need for cash to handle unforeseen events such as economic downturns or unexpected expenses. Both motives are valid reasons for a firm to hold cash.

Two of the Primary Motives for a Firm to Hold