Which of the Following Reasons for Holding Cash Is Not

question 82

Multiple Choice

Which of the following reasons for holding cash is not under the control of management as a matter of policy?

• A)Transaction demand
• B)Precautionary demand
• C)Speculative demand
• D)Compensating balances
• E)All of these reasons are under the complete control of management.

Understand and calculate net investment in capital budgeting projects.

Evaluate the financial implications of replacing existing equipment with new equipment, including the calculation of net cash flows.

Analyze the impact of depreciation methods on project cash flows and net investment.

Determine the after-tax cash flows of capital projects.

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Definitions:

Leverage Ratios

Financial ratios that measure the amount of capital coming from debt and assess the ability of a company to meet financial obligations.

Liquidity Ratios

Financial metrics used to assess a company's ability to meet its short-term obligations, indicating how quickly assets can be converted into cash.

Debt Ratio

A financial ratio that measures the extent of a company's leverage, calculated as the company's total liabilities divided by its total assets.

Total Debts

The sum of all financial obligations or liabilities owed by an individual, organization, or country.