A cash balance that is held to enable the firm to take advantage of any bargain purchases that might arise is called a ____ balance.
A)transactions
B)compensating
C)precautionary
D)speculative
E)convertible

Question

Quizplus · Accepted Answer

A speculative balance is held with the intention of taking advantage of any bargain purchases that might arise. This is different from a precautionary balance that is held to cover unexpected cash shortages and a compensating balance that is held as a requirement by some lenders. A transactions balance is held for regular business operations and a convertible balance allows for conversion into another form of asset.

A Cash Balance That Is Held to Enable the Firm