Question

What are some reasons that employers may pay their employee's wages in cash? (all that apply)

A) Low risk of theft

B) Low levels of internal controls

C) Temporary workers

D) High liquidity for employees

Answer 1

Employers might pay in cash due to temporary workers, the high liquidity it provides employees, or low internal controls. Paying in cash is not commonly associated with low theft risk. Banks facilitate secure and efficient transactions and offer FDIC-insured account safety.

Step-by-step explanation:

Employers may choose to pay their employees' wages in cash for several reasons. One reason could be dealing with temporary workers who may not have bank accounts or are working on short-term assignments. Paying in cash provides high liquidity for employees so that they can have immediate access to their earnings. Another reason might be low levels of internal controls within the company, which could make processing payroll through a bank more difficult or less feasible. However, paying in cash is typically not associated with a low risk of theft; in fact, it can increase the risk of theft compared to digital payment methods. Banks and bank accounts help make the economy more efficient by providing a secure way to store and transfer money. They offer easy access to funds through direct withdrawal, writing a check, or using a debit card, while also providing security through FDIC insurance up to $250,000.