Assuming That the Firm Can Either Hold Cash Paying No

question 13

Multiple Choice

Assuming that the firm can either hold cash paying no interest or invest in marketable securities,which of the following might induce the manager to hold higher cash balances?

• A) The cost of borrowing is high relative to interest rates on marketable securities.
• B) Future cash flows are relatively predictable.
• C) The cost of cash balances is relatively high.
• D) Bank interest rates are expected to increase.

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Definitions:

Licensing Agreements

Contracts in which one party (the licensor) permits another party (the licensee) to use rights to intellectual property, technology, or product lines.

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Legal rights that result from intellectual activity in industrial, scientific, literary, and artistic fields, granting the creator exclusive rights to their work.

Licensing

Permission to use another company’s trademarks, patents, copyrights, or expertise.

Wholly Owned Subsidiaries

Companies entirely owned by another company, allowing the parent company to have complete control over operations and decision-making.