Question

Which one of the following best represents the transaction motive for holding cash? A. Buying extra inventory in response to an unexpected sale offered by a supplierB.Distributing the weekly paychecksC. Increasing the minimum cash balance for the firm's main bank accountD. Unexpectedly purchasing a competitor's firmE. Holding cash in anticipation that the firm may need to close for a few days if floodwaters keep rising

Answer 1

Answer: Distributing the weekly paychecks.

Explanation: In response to the question, a good motive for holding cash is that an employer may want to use the cash to pay his workers their weekly paychecks. A paycheck is the payment given to an employee by the employer after each working duration (could be monthly or weekly)