If There Is a Tax Disadvantage to Retaining Cash,why Do

question 99

Essay

If there is a tax disadvantage to retaining cash,why do some firms accumulate large cash balances?

---

Definitions:

Unsystematic Risk

The risk associated with a specific company or industry, which can be mitigated through diversification.

Diversification

A risk management strategy that mixes a wide variety of investments within a portfolio to reduce exposure to any single asset or risk.

Weights

In finance, it often refers to the ratios or percentages assigned to different components of a portfolio or an index, indicating their relative importance.

Expected Return

The anticipated profit or loss of an investment, calculated by taking the average of possible returns weighted by their probabilities.