A company that has an unpredictable cash flow,and is holding cash because of things that might happen due to this uncertainty,is holding a larger minimum cash balance due to which type of motive?
A) transaction
B) precautionary
C) speculative
D) common sense

Question

Quizplus · Accepted Answer

The company is holding cash as a precautionary measure to deal with unpredictable cash flows. This is a precautionary motive for holding cash, which involves holding cash to deal with unexpected events or uncertainties. A transaction motive involves holding cash to facilitate routine business transactions, while a speculative motive involves holding cash to take advantage of investment opportunities. "Common sense" is not a valid option for a motive for holding cash.

A Company That Has an Unpredictable Cash Flow,and Is Holding