A consultant recommends that a company hold funds for the following two reasons.
Reason 1: Cash needs can fluctuate substantially throughout the year.
Reason 2: Opportunities for buying at a discount may appear during the year.
The cash balances used to address the reasons given above are correctly classified as
|
Reason 1 |
Reason 2 |
|
|
a. |
Speculative balances |
Speculative balances |
|
b. |
Speculative balances |
Precautionary balances |
|
c. |
Precautionary balances |
Speculative balances |
|
d. |
Precautionary balances |
Precautionary balances |