Precautionary balance
Precautionary balance is a cash balance held in reserve for random, unforeseen fluctuations in cash inflows and outflows.
Definitions
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Precautionary balance. A cash balance held in reserve for random, unforeseen fluctuations in cash inflows and outflows.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
