A Firm with Unpredictable Cash Flows Is Trying to Set

question 119

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:

3-nitrophthalic Acid

An aromatic dicarboxylic acid compound with a nitro group substituted at the 3-position on the benzene ring.

Pentanedioic Acid

An organic compound also known as glutaric acid, with the formula C5H8O4, characterized by two carboxylic acid groups at each end of a five-carbon chain.

Trans-1,3-cyclohexanedicarboxylic Acid

A type of dicarboxylic acid where the carboxyl groups are located on the first and third carbon atoms of a cyclohexane ring, in a trans configuration.

Carboxylic Acids

Organic compounds containing a carboxyl group (COOH), known for being acidic and reactive in condensation reactions.