The Miller-Orr Model

question 373

Multiple Choice

The Miller-Orr model:

• A) Is more simplistic than the BAT model.
• B) Analyzes cash balances within both an upper limit and a lower limit as set by management.
• C) Bases the optimal level of cash solely on the opportunity costs of holding cash.
• D) Supports the argument that the target cash balance declines as order costs increase.
• E) Is based on cash flows that randomly fluctuate.

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Definitions:

Stock Investments

Financial assets representing ownership interest in companies; shareholders may receive dividends and have voting rights.

Cash Dividends

Payments made by a corporation to its shareholders as a distribution of profits in the form of cash.

Net Income

The remaining profit for a company after removing all costs and tax obligations from the overall revenue.

Insignificant Influence

A situation where an investor does not have significant control or influence over the operations and management of a company in which they hold an investment.