Question

Firm A’s management is very conservative whereas Firm B’s is more aggressive. All else equal, which firm would probably have larger holdings of marketable securities? Explain your answer. Give an example of communication style for Firm A and Firm B and why each may be effective or ineffective.

Answer 1

Company B will have probably larger holding of marketable securities because management of B is aggressive so it would hold less cash in physical form and investment it into marketable securities while A's management is conservative so it will much of cash in physical form and less in marketable securities due to the fear of shortage of cash.

Suppose firm A follow only the formal form of communication, this will give a clear idea of to whom you will report and from whom you will get instructions and to whom you would direct but on another hand this form of communication would be more inhuman and would lack personal interaction with co workers

Suppose Firm B follows a formal and also a grapevine form of communication due to which formal and informal both types of communication would prevails in the organization and which will ensure the formal and a good form of informal communication with in co workers and creates good relationship among them.