9 Mar 2011 – Working Capital Management At Kirloskar Pneumatics Co. Ltd. By Rajesh Menon > OBJECTIVES OF CASH MANAGEMENT: I. To meet the ... 2. [PDF]
CASH MGMT BOOK NEW - Financial Manageme
Sunday, April 5, 2009
What are the objectives of cash management?
"Cash Management" =) Cash management is a broad term that refers to the collection, concentration, and disbursement of cash. It encompasses a company's level of liquidity, its management of cash balance, and its short-term investment strategies. In some ways, managing cash flow is the most important job of business managers. If at any time a company fails to pay an obligation when it is due because of the lack of cash, the company is insolvent. Insolvency is the primary reason firms go bankrupt. Obviously, the prospect of such a dire consequence should compel companies to manage their cash with care. Moreover, efficient cash management means more than just preventing bankruptcy. It improves the profitability and reduces the risk to which the firm is exposed. Objective of cash management
1) To make Payment According to Payment Schedule:-
Firm needs cash to meet its routine expenses including wages, salary, taxes etc. Following are main advantages of adequate cash-
a)To prevent firm from being insolvent.
b)The relation of firm with bank does not deteriorate.
c)Contingencies can be met easily.
d)It helps firm to maintain good relation’s with suppliers. (2) To minimise Cash Balance:-
The second objective of cash management is to minimise cash balance. Excessive amount of cash balance helps in quicker payments, but excessive cash may remain unused & reduces profitability of business. Contrarily, when cash available with firm is less, firm is unable to pay its liabilities in time. Therefore optimum level of cash should be maintain.
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