Why might a company prefer a zero balance account over holding multiple accounts?

A zero balance account (ZBA) is designed to maintain a balance of zero by automatically transferring funds in and out as needed. This approach simplifies cash management because it allows a company to concentrate its funds in a single account rather than spreading them across multiple accounts.

By using a zero balance account, a company can streamline its cash flows, making it easier to monitor and manage liquidity. This system ensures that excess funds from operational accounts are funneled into the zero balance account or other investment accounts, maximizing the efficiency of capital use. Therefore, it minimizes idle cash and allows for more effective cash flow forecasting and liquidity management.

The benefits of centralizing funds into one account reduce administrative burdens, lower maintenance costs associated with multiple accounts, and improve overall cash visibility. This makes option B the most relevant reason a company might prefer a zero balance account over maintaining multiple accounts.