Which of the Following Scenarios Is an Example of the Transactions

question 61

Multiple Choice

Which of the following scenarios is an example of the transactions motive to hold cash?

• A)An oil company saves abnormally high earnings as cash on its balance sheet which it will use to buy another oil company.
• B)A manufacturing company holds cash to pay its suppliers for raw materials.
• C)An airline keeps a reserve of cash during the winter months in case it has to pay customers a refund because bad weather results in a cancellation of flights.
• D)A firm holds cash to pay its annual dividend.

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Definitions:

Unissued Shares

Unissued Shares are portions of a company's authorized capital stock that have been authorized for issuance but have not yet been issued to shareholders.

Treasury Stock

Shares that were once part of the open market stock but were bought back by the issuing company, reducing the amount of outstanding stock.

Quorum

The minimum number of members required to be present at a meeting to make the proceedings of that meeting valid.

Shareholder Agreement

A contract among shareholders of a company outlining their rights, obligations, and mutual agreements regarding company operations and governance.