Fundamentals of Corporate Finance
Fundamentals of Corporate Finance
11th Edition
ISBN: 9780077861704
Author: Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Bradford D Jordan Professor
Publisher: McGraw-Hill Education
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Chapter 19.A, Problem 2BCQ
Summary Introduction

To discuss: The tradeoff suggested by the BAT (Baumol‑Allais‑Tobin) model.

Introduction:

Cash management refers to the process of handling and using cash in the business. Cash management is necessary because the businesses are motivated to hold cash for speculation, precaution, and for carrying out business-related transactions.

Target cash balance refers to the level of cash that the company should maintain to determine the tradeoff between the carrying costs of cash and its adjustment or shortage costs. The carrying costs indicate the opportunity cost of cash, and the shortage cost indicates the trading costs.

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Chapter 19 Solutions

Fundamentals of Corporate Finance

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