A Firm Keeps a Precautionary Cash Balance to Cover Unexpected

A firm keeps a precautionary cash balance to cover unexpected transactions during the budget period. The size of this balance depends on how safe the firm desires to be in its ability to meet unexpected transactions.

A) The larger the precautionary cash balance, the greater is the firm's ability to meet unexpected expenses.
B) The larger the precautionary cash balance, the less is the risk of financial embarrassment and loss of credit standing.
C) The larger the precautionary cash balance, the greater the potential opportunity cost.
D) All of the above