What is a transactions balance?
A) the cash a firm holds to counter the uncertainty surrounding its future cash needs
B) the cash a firm places into short-term investments
C) the cash a firm holds in order to pay its bills
D) the cash a firm holds to gain tax advantages

Question

Quizplus · Accepted Answer

A transactions balance refers to the cash a firm holds in order to pay its bills. This cash is used to make daily transactions such as paying bills and making purchases. It is important for a firm to maintain a sufficient transactions balance to ensure that it can meet its short-term financial obligations. Options A, B, and D refer to other types of cash holdings that are not specifically related to transactions balances.

What Is a Transactions Balance