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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › reasons for holding cash
dear sir
whats the difference between precautionary motive and speculative motive
( i did watch the lectures ) but could not grasp the exact diffrence
Precautionary is carrying more than you expect to need so as to be safer if you find you need more than you expect.
Speculative if where you carry more than you expect to need to be able to take advantage of special situations (such as materials being available at a cheap price for a period).
The difference is that with speculative you do not have to spend extra money – it would be your choice. Whereas with precautionary it is where you might have to spend extra money because (for example) costs are higher than you expected.