Speculative Motive

It refers to the desire’ of a firm to take advantage of opportunities which present them selves at unexpected moments and which are typically outside the normal course of business. While the precautionary motive is defensive in nature in that must make provisions to tide over unexpected contingencies, the speculative motive represents a positive and aggressive approach. Finns aim to exploit profitable opportunities and keep cash in reserve to do so. The speculative motive helps to take advantage of

• An opportunity to purchase raw materials at a reduced price on payment of immediate cash

• A chance to speculate on interest rate movements by buying securities when interest rates are expected to decline

• Delay purchases of raw materials on the anticipation of decline in prices; and

• Make purchase at favourable prices.

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