What are the primary motives for holding cash?

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What are the primary motives for holding cash?

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What are the primary motives for holding cash?

Explanation & AnswerSolution by a verified expert

Explanation

Holding a certain level of cash helps a company in the following ways:

To meet the day-to-day expenses of the business such as payment of wages, salaries, interests, and so on.
To meet the unforeseen circumstances arising in the course of business such as an increase in the price of the raw materials, an increase in demand, and so on.
To meet the contingencies arising in the daily course of business which result in an urgent need of cash.

Verified Answer

A certain level of cash is held by a company to meet daily expenses, unexpected circumstances, and cash shortages arising in the normal course of business.

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