Jasmine started a small business two years ago. The business is just now seeing some success, and Jasmine notes that she has a few thousand dollars more in her bank account than she currently needs to pay her bills. However, because of the uncertainty of cash flows in her new business, she is concerned that she may need access to these funds on fairly short notice in the future. Given this situation, what should Jasmine do?
A) She should put some of her excess cash into money market mutual funds.
B) She should use her excess cash to buy intangible assets.
C) She should invest the funds in common stocks.
D) She should keep all of these funds in her chequing account.

Question

Quizplus · Accepted Answer

Putting excess cash into money market mutual funds is a good choice in this situation because it provides liquidity and easy access to the funds if needed in the short term. Money market mutual funds typically invest in low-risk, short-term debt securities, so they are relatively safe and offer a modest return on investment, making them a better choice than keeping the funds in a chequing account. Buying intangible assets or investing in common stocks may not be the best choice as they are not as liquid and have more volatility in returns, which may make it difficult for Jasmine to access the funds quickly if needed.

Jasmine Started a Small Business Two Years Ago