What your analysis on this: The Baumol model has limitations in that it assumes a structured uniform

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What your analysis on this: The Baumol model has limitations in that it assumes a structured uniform and certain level of cash balances. It prevents fluctuating cash flows making it unable to predict daily cash inflows and outflows. The Miller-Orr model allows cash balances to fluctuate irregularly. It assumes that the transfer of cash to marketable securities and vice versa is possible with the firm incurring some conversion costs. Marketable securities provide marginal yield in the form of interest income. I think the Miller-Orr model is more frequently used and more logical in the end

Posted Date: May 09, 2024 02:09 AM

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What your analysis on this: The Baumol model has limitations in that it assumes a structured uniform

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A great analysis of the Baumol and MillerOrr models Youre absolutely right that the Baumol model has ... View the full answer

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