A Firm with Unpredictable Cash Flows Is Trying to Set

question 71

Multiple Choice

A firm with unpredictable cash flows is trying to set upper and lower limits for cash balances.Which of the following factors will result in upper and lower limits being closer to each other?

• A)variance of the cash flows is low
• B)cost of trading securities is high
• C)interest rate is low
• D)current cash balance is low

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Definitions:

Punitive Damages

Monetary compensation awarded in addition to actual damages, intended to punish the defendant for egregious behavior and deter future misconduct.

Good Faith

A principle emphasizing honesty, sincerity, and integrity in dealings without intending to deceive.

Erroneous Denial

A mistaken rejection, often relating to claims or applications, where the refusal was based on incorrect information.

Breach Of Warranty

Occurs when a product or service fails to meet the terms or conditions explicitly or implicitly stated in a warranty agreement.