Which of the following affects the precautionary motive for holding cash?
A) the cash flow predictability
B) the firm's access to external funds
C) both A and B
D) none of the above

Question

Quizplus · Accepted Answer

The precautionary motive for holding cash is affected by both the predictability of cash flows and the firm's access to external funds. If cash flows are less predictable or if the firm has limited access to external funds, it will have a higher precautionary motive for holding cash to cover unexpected expenses or investment opportunities.

Which of the Following Affects the Precautionary Motive for Holding