Category Archives: MANAGEMENT OF CASH AND MARKETABLE SECURITIES

Sharing Risk

Sharing Risk The indexation clauses illustrate the extreme positions situations in- which the entire independence curable foreign exchange risk is shared by one of the parties only. In practice, the rec  parties may stipulate  hat loss incurred during the ‘intervening period (the dates of contract an maturity) is to he shared between   hem in predetermined proportions. Risk-sharing techniques lam  be

MANAGEMENT OF CASH AND MARKETABLE SECURITIES

MANAGEMENT OF CASH AND MARKETABLE SECURITIES INTRODUCTION Cash management is one of the key areas of working capital management. Apart from the fact that the most liquid current asset, cash is the common denominator to which all current assets can educed because the other major liquid assets, that is, receivables and inventory get eventually erupted into cash. This underlines the significance of cash management be

CASH MANAGEMENT: BASIC STRATEGIES

CASH MANAGEMENT: BASIC STRATEGIES The cash budget, as a cash management tool, would throw light on the net cash position of a winnowing the cash position, the management should work out the basic strategies to be to manage its cash. The present section attempts to outline the basic strategies of cash management. The broad cash management strategies are essentially related to the cash turnover process, that cash c

Elements/Preparation of Cash Budget

Elements/Preparation of Cash Budget Thus, the principal aim of the cash budget, as a tool to predict cash flows over a given period of time, is to ascertain whether at any point of time there is likely to be an excess or shortage of cash. The preparation of a cash budget involves various steps. These may be described as the clements of the cash budgeting system. The first element of a cash budget is the selecti

Cash Budget: Management Tool

Cash Budget: Management Tool A firm is well advised to hold adequate cash balances hut should avoid excessive balances. The firm has, therefore, to assess its need for cash properly. The cash budget is probably the most important tool in cash management. It is a device to help a firm to plan and control the use of cash. It is a statement showing the estimated cash inflows and cash ouillows over the planning hor

Orgler’s Model

Orgler's Model  According to this model, an optimal cash management strategy can be determined through the use of a multiple linear programming model. The' construction of the model comprises three sections: (1) selection of the appropriate planning horizon, (2) selection of the appropriate decision variables and (3) formulation of the cash management strategy itself, The advantage of linear programming model

DETERMINING CASH NEED

DETERMINING CASH NEED After the examination of the pertinent considerations and cost that determine cash needs, the next aspect relates to the determination of cash needs. There are two approaches to derive an optimal cash balance. namely, (a) minimising cost cash models and (b) cash budget. Cash ManaJement/Conversion Models While it is true that financial managers need not necessarily follow cash management m

Excess Cash Balance Costs

Excess Cash Balance Costs The cost of having excessively large cash balances is known as the excess cash balance cost. If large funds are idle, ‘the implication is that the rum has missed opportunities to-Invest those funds and has thereby lost interest which it would otherwise have eamed. This loss of interest is primarily the excess cost. Procurement and Management These are the costs associated with est

Short Costs

Short Costs Another general factor to be considered in determining cash needs is the cost associated with a shortfall in the cash needs. The cash forecast presented in the cash budget would reveal periods of cash shortages. In addition, there may be some unexpected shortfall. Every shortage of cashwhether expected or unexpected-involves a cost ‘depending upon the severity, duration and frequency of the sh

FACTORS DETERMINING CASH NEEDS

FACTORS DETERMINING CASH NEEDS The factors that determine the required cash balances are: (i) synchronization of cash flows, OJ) short costs, (iii) excess cash balance. (iv) procurement and management, and (v) uncertainty. Synchronisation of Cash Flows The need for maintaining cash balances from the non synchronisation of the inflows and outflows of cash: if the receipts and payments-of cash perfectly coincide