Asked by Araceli ArredondoLona on Jul 23, 2024
Verified
Management's desired lower level of cash is needed to determine the optimal strategy using the BAT model.
BAT Model
Stands for the Best Alternative to a Negotiated Agreement; a benchmark used in negotiations to determine each party's alternative options if the current negotiations fail.
Lower Level
Pertains to the subordinate or less complex components within a system, organization, or hierarchy.
- Recognize the strengths and weaknesses of the BAT model in estimating cash demands and proficiently handling financial resources.
Verified Answer
NM
Nadie Mc CarthyJul 28, 2024
Final Answer :
False
Explanation :
The BAT model (Baumol-Tobin model) primarily focuses on determining the optimal cash balance by balancing the trade-off between the transaction costs of converting securities to cash and the opportunity cost of holding cash. It does not specifically require management's desired lower level of cash to determine the optimal strategy.
Learning Objectives
- Recognize the strengths and weaknesses of the BAT model in estimating cash demands and proficiently handling financial resources.