Why do rms hold cash?
In real world every business/ firm uses to retain some of its cash, as it is the most immediate available
asset either to set o various issues or avail economic benefits. Firms do hold cash for various reasons
and these are discussed briey with real world examples.
Transacon move: Large firms hold more cash to cope with the be!er se!lement of
transac”on that is going to occur, otherwise a non-financial asset will be converted into cash so
that firm can use this cash in payments. It is much clear that conver”ng non-financial asset will
take “me and firm will incur cost, to avoid the cost and saving the “me firm should have
suffcient cash to deal its transac”ons eec”vely. For example Apple Inc. hold above $200 billion
cash on its statement of financial posi”on and is ready any”me to enter into transac”on that
might be in the best interest of Apple Inc.
Precauonary move: Many firms do hold cash as a precau”onary reason, there may be a worst
