Determining the appropriate target cash balance involves assessing the trade-off between: A. income and diversification. B. the benefit and cost of liquidity. C. balance sheet strength and transaction
Question:
Determining the appropriate target cash balance involves assessing the trade-off between:
A. income and diversification.
B. the benefit and cost of liquidity.
C. balance sheet strength and transaction needs.
D. All of these.
E. None of these.
Answers (1)
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Pearl April 5, 2023 в 01:50The answer is B. The appropriate target cash balance must consider the benefits and costs of liquidity. Holding too much cash can result in missed investment opportunities and lowered income, while holding too little could lead to liquidity problems and inability to meet payment obligations. The other options, income and diversification (A) and balance sheet strength and transaction needs (C), may be important factors to consider but do not directly address the issue of managing cash balance. Therefore, the correct answer is B.
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