The company A manages cash by using Baumol model for defining the amount of cash. According to the Baumol model the average model the average balance (C */2) is equal to 500$. That moment the negotiable securities yield was 4%. A steep rise caused an increase in interest rates to 9%. Which is the new average cash balance?
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
The company A manages cash by using Baumol model for defining the amount of cash. According to the Baumol model the average model the average balance (C */2) is equal to 500$. That moment the negotiable securities yield was 4%. A steep rise caused an increase in interest rates to 9%. Which is the new average cash balance?
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