Which of the following would be an example of the "precautionary motive" for a firm holding cash balances?
A) purchase of inventory
B) anticipating a strike
C) purchase fixed assets
D) make dividend payments

Question

Quizplus · Accepted Answer

The precautionary motive for holding cash balances refers to the desire to have cash on hand to handle unforeseen events or emergencies such as a strike, a sudden economic downturn, or an unexpected expense. Purchasing inventory, fixed assets, or making dividend payments are all intentional cash outflows and do not relate to the precautionary motive.

Which of the Following Would Be an Example of the "Precautionary