Asked by nathi ngcobo on Jul 15, 2024
Verified
The costs of holding too little cash are called:
A) Carrying costs.
B) Adjustment costs.
C) Maintenance costs.
D) Variable costs.
E) Total costs.
Carrying Costs
Expenses associated with holding or storing inventory, including insurance, storage, and loss through obsolescence.
Adjustment Costs
These are expenses incurred by a firm when adjusting its production volume, workforce, or operations, often associated with changing output levels.
Holding Cash
Maintaining a portion of one's assets in cash or cash equivalents to manage risk or for upcoming transactions.
- Understand the financial implications of holding inadequate or surplus cash reserves, and the significance of money market tools in liquidity control.
Verified Answer
PH
Peyton HolstonJul 21, 2024
Final Answer :
B
Explanation :
Adjustment costs are associated with the costs of holding too little cash, as they refer to the expenses incurred when a company needs to adjust its cash holdings, either by securing additional financing or by liquidating assets.
Learning Objectives
- Understand the financial implications of holding inadequate or surplus cash reserves, and the significance of money market tools in liquidity control.