Asked by Carrie Barnes on Jul 11, 2024
Verified
In regards to the Miller-Orr Model, the greater the variance of the cash flows, the greater the distance between the target balance and the minimum balance.
Miller-Orr Model
A finance model that helps in managing cash flows and cash reserves in a business efficiently.
Cash Flows
The aggregate quantity of cash flowing both in and out of a corporation, impacting its liquid assets.
Target Balance
A predetermined amount of money that a company or individual aims to have in an account at any given time.
- Become familiar with the operations and positive aspects of the BAT and Miller-Orr models in handling cash surpluses.
Verified Answer
NB
Nyanda BangayJul 12, 2024
Final Answer :
True
Explanation :
The Miller-Orr Model suggests that with higher variance in cash flows, the firm faces greater uncertainty, leading to a wider spread between the target cash balance and the minimum balance to accommodate this uncertainty.
Learning Objectives
- Become familiar with the operations and positive aspects of the BAT and Miller-Orr models in handling cash surpluses.