Cash Management

Chapter-IV
Analysis of Cash and Liquidity Management
• Introduction  
• Meaning of Cash Management  
• Analysis of Cash Management
• Cash Planning
• Cash Forecasting and Cash Budgeting
• Cash Control Technique
• Control and Review
• Liquidity Analysis
• Measurement of Liquidity and Trends
- Working of Liquidity and Trend
- Net Working Capital to Current Liabilities
- Working Capital Turnover
Introduction
One of the most important areas in the day-to-day management of the firms deals with the anagement of working capital, which is defined as all the short-term assets used in daily operations. This consists primarily of cash, marketable securities, accounts receivable and inventory. The balances in these accounts can be highly volatile as they respond very quickly to changes in the firm’s operating environment.   A highly liquid firm has sufficient cash to pay its bills at all times. An illiquid firm is unable to pay its bills when due.   In a financial sense, the term cash refers to all money items and sources that are immediately available to help in paying firms’ bills. On the balance sheet, cash assets include deposits in financial institutions and cash equivalent in money market funds or marketable securities. All highly liquid shortterm securities are treated as cash. Most government and corporate securities are treated as cash because they may be liquidated through a telephone call.   Cash is the most important current assets for the operations of the business. It is the basic input needed to keep 120the business running on a continuous basis. It is the money, which the firm can disburse immediately without any restriction. The term cash includes coins, currency, cheques held by the firm and balance in its bank accounts.   J.M. Keyens postulated three motives for holding cash viz. transactional motive, precautionary motive, and speculative motive. These can be said to form the basis for cash management in business enterprise. Cash... [continues]

Read full essay