Provide Five Reasons Why Firms May Have a Policy of Maintaining

question 36

Essay

Provide five reasons why firms may have a policy of maintaining a minimum cash balance at all times.

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Definitions:

Merchandise Inventory

Goods that a retailer, wholesaler, or distributor holds for the purpose of resale.

Monthly Depreciation

The allocation of an asset's cost over its useful life on a monthly basis, reflecting its consumption or wear and tear.

Cash Budget

A financial plan that estimates cash inflows and outflows over a specific period, helping manage liquidity and cash reserves.

Direct Labor Budget

An estimate of the total amount of labor cost that will be needed to produce the products a company plans to manufacture in a specific period.