CA Intermediate · Financial Management and Strategic Management · Treasury and Cash Management
Under the Miller-Orr model, if the lower cash limit is ₹10,000, the spread between upper and lower limits is ₹30,000, then the return point is:
The return point under Miller-Orr equals the lower limit plus one-third of the spread. Here that is 10,000 plus 10,000, giving ₹20,000. The ₹40,000 figure is the upper limit, not the return point.
- A₹20,000Correct
- B₹15,000
- C₹40,000
- D₹30,000
Explanation
Return point = Lower limit + one-third of spread = 10,000 + 30,000/3 = 20,000. The upper limit is 10,000 + 30,000 = 40,000, which is a distractor; 15,000 wrongly adds half the spread of 10,000.
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