What Is the Optimal Amount of Cash a Firm Should

question 38

Multiple Choice

What is the optimal amount of cash a firm should hold?

• A)As much as possible
• B)Just enough to pay for purchases
• C)Enough to be liquid
• D)None

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Definitions:

Expense Account(s)

Accounts used to record expenses in the general ledger, which represent the costs of operating a business that are not directly tied to the production of goods or services.

Income Summary

An account used in the closing process, summarizing all revenues and expenses for a period, to transfer the net result to capital accounts.

Capital Account

A capital account is an account on a company's balance sheet that represents the equity investment of owners and shareholders.

Closing Entries

Journal entries made at the end of an accounting period to transfer the balances of temporary accounts to a permanent equity account.