Last Updated on May 4, 2023 by kavin

Which one of the following is not consider by miller – orr model.

The Miller-Orr model is a financial management model that helps organizations determine their optimal cash balance. The model considers various factors such as the cost of holding cash, the cost of investing excess cash, and the transaction costs associated with moving funds between accounts. However, a few factors that are not consider by Miller-orr  model.  This article is written to answer the question which one of the following is not consider by Miller-orr model.

Factors not consider by miller – orr model.

Interest rates:

The Miller-Orr model assumes that interest rates are constant over time and does not take into account changes in interest rates. In reality, interest rates can fluctuate, which can affect the cost of holding or investing cash.

Cash inflows:

The miller – orr model assumes that cash inflows are known and predictable, which may not always be the case in real-world scenarios.

Credit risk:

The Miller-Orr model does not explicitly consider credit risk, which can impact the cost of holding or investing cash.

Liquidity needs:

While the miller -orr model considers the cost of holding excess cash, it does not explicitly consider an organization’s liquidity needs or any unexpected cash requirements.

Overall, the Miller-Orr model provides a useful framework for organizations to manage their cash balances efficiently. However, it is important to recognize its limitations and consider other factors that may impact an organization’s cash management strategy.

Above factors were the one that are not considered by miller-orr model