Answered

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Automobile manufacturers have enormous cash reserves. In the middle of 2015, Ford Motor Co. had about $31.9 billion in cash, General Motors had about $25 billion, and Toyota had about $43 billion. Why would firms such as these hold such large quantities of cash?

Sagot :

Tundexi

Answer:

Firms like automobile manufacturers hold large quantities of cash for the following reasons:

a. Speculative and Precautionary motives:

Firm hold large cash in order to take advantage of any sudden investment opportunities. These opportunities are like bargain purchase opportunitie, favorable interest rate  etc. They also hold cash to take a precaution as a safety net, in case some urgent cash needs arise in terms of sudden expenses.

b. Transaction motives:

Firm hold large cash in order to pay their day-day bills. There is always a delay in cash in cash receivables and payable. It is possible that there is need to pay the suppliers, pay wages and salaries etc earlier than the cash is received from sales.

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