How would you expect the firms cash balance to respond the following changes Interest Rate Increase?

When interest rates increase, firms generally face higher borrowing costs, which may lead to a reduction in investment and spending. As a result, firms might choose to hold onto more cash as a precautionary measure to manage potential liquidity issues, expecting slower revenue growth. However, the opportunity cost of holding cash also rises due to higher interest rates, which could incentivize firms to invest surplus cash instead. Overall, the response can vary based on the firm's specific circumstances and market conditions.