The companies hold cash by different types of motivations: - Transaction Motive explains holding cash or near cash to meet routine cash requirements of a company to finance transactions in the normal course of business such as purchasing raw materials, paying expenses, taxes, dividends etc. - Precautionary Motive explains holding cash or near cash as a cushion to meet unexpected contingencies such as flood, strikes etc. - Speculative motive explains the situations in which there occurs extra ordinary opportunities for the companies to quickly take advantage. For example, in order to be able to utilize the cash discount provided by a supplier, certain amount of cash can be made available as a strategy