Factors Affecting Demands for Funds

• Transactionary Motives

  There are certain day-to-day costs of running a business that need to be paid in cash, which means that management needs to hold some amount of cash
• Precautionary Motives

  A desire to hold cash in order to be able to deal effectively with unexpected events that require cash outlay.
• Speculative Motives

  A desire to hold cash to be poised to exploit any attractive investment opportunity requiring a cash expenditure that might arise.
• Financial Innovations

  Changes in payments reduce demands for cash money for transactions