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.

---

Definitions:

Price Index

is a measure that examines the weighted average of prices of a basket of consumer goods and services, used to track inflation or deflation.

GDP

Gross Domestic Product is the sum of the market value of all final goods and services made within a country's borders in a given timeframe.

Gross National Product

The total value of all goods and services produced by a country's residents and businesses, regardless of where the production takes place, over a defined period.

Net Domestic Product

The total value of all goods and services produced within a country in a specific time period, minus depreciation.