Firms Would Need to Hold Zero Cash When

question 4

Multiple Choice

Firms would need to hold zero cash when:

• A) transactions related needs are greater than cash inflows.
• B) transactions related needs are less than cash inflows.
• C) transactions related needs are not perfectly synchronized with cash inflows.
• D) transactions related needs are perfectly synchronized with cash inflows.

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Definitions:

Cost Of Capital

The total cost of funds used for financing a business, which may include debt and equity financing costs.

Cost Of Labor

The total amount of financial compensation and benefits paid to employees for their work, including wages, salaries, and benefits.

Isocost Line

An isocost line represents all combinations of inputs (like labor and capital) that cost the same amount for a firm, illustrating budget constraints in production.

Total Cost

A combination of constant and fluctuating expenses that a company endures in the process of producing goods or services.