Which cash management model determines the optimal target cash balance by balancing transaction costs against the opportunity cost of holding liquid cash, analogous to EOQ?

Explanation

Core Concept: The Baumol Model treats cash balances like inventory, calculating optimal cash transfer size C* = SQRT((2 * Annual Cash Needed * Transaction Cost) / Opportunity Interest Rate). Context/Distractors: Miller-Orr model is used when cash flows fluctuate randomly with upper/lower control limits. Black-Scholes values options. Exam Tip/Key Fact: Baumol model assumes deterministic (constant and predictable) cash outflows.