Asked by mahesh likhe on Jul 22, 2024
Verified
Which of the following is the best definition of transaction motive?
A) The costs associated with holding too little cash.
B) An automated teller machine card used at the point of purchase to avoid the use of cash. As this is not a credit card, money must be available in the user's bank account.
C) A chequing account in which a zero balance is maintained by transfers of funds from a master account in an amount only large enough to cover cheques presented.
D) The need to hold cash to satisfy normal disbursement and collection activities associated with a firm's ongoing operations.
E) A firm's desired cash level as determined by the trade-off between carrying costs and shortage costs.
Transaction Motive
The need to hold cash for the purpose of conducting day-to-day business transactions.
Disbursement Activities
The process involving the payment of money from a fund or account, typically referring to the cash flow outgoing from a business or individual for expenses, investments, or other financial purposes.
Collection Activities
Actions taken by businesses or agencies to collect debts owed by customers or clients.
- Describe essential terms linked to cash management, encompassing target cash balance, zero-balance account, and the motive for transactions.
Verified Answer
SW
Shauntisha WilliamsJul 26, 2024
Final Answer :
D
Explanation :
The transaction motive refers to the need for holding cash to manage everyday operational expenses and transactions, which is best described in option D.
Learning Objectives
- Describe essential terms linked to cash management, encompassing target cash balance, zero-balance account, and the motive for transactions.