A consultant recommends that a company hold funds for the following two reasons.
Reason 1: Cash needs can fluctuate substantially throughout the year.
Reason 2: Opportunities for buying at a discount may appear during the year.
The cash balances used to address the reasons given above are correctly classified as
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Reason 1
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Reason 2
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a.
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Speculative balances
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Speculative balances
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b.
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Speculative balances
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Precautionary balances
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c.
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Precautionary balances
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Speculative balances
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d.
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Precautionary balances
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Precautionary balances
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