Which of the following is not a motive for holding cash?

Transaction purposes

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Precaution against unexpected expenses

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Extending loans to group comanies

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Speculation purposes

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Mismatch between cash inflows and outflows.

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Solution

The correct option is B Extending loans to group comanies
The following points highlight the five main motives for holding cash balances in a firm. The motives are: 1. Transaction Motive
2. Precautionary Motive
3. Speculative Motive
4. Future Requirements
5. Compensating Balances.

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