Cash Management Objective

Topics: Management, Cash management, Cash flow Pages: 7 (1823 words) Published: July 28, 2012
1. OBJECTIVES OF CASH MANAGEMENT: for Working Capital - Scribd
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

mba answer
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.

Posted by RAHUL CHOUDHARY at 1:24 AM 


Plan, manage, monitor, and control cash flows in order to create an acceptable balance between holding too little and too much cash. The ideal cash management system which allows the small business to operate for extended periods with cash balances near or at a level of zero is possible only under two conditions: (1) a perfect forecast of future net cash flows (cash inflows minus cash outflows) and (2) perfect matching of cash receipts and disbursements. Unfortunately, these two conditions are not commonly seen. Note: Perfect cash forecasting is not possible; inflows and outflows do not occur at the same time in the same amounts. Some inflows and outflows are uncertain, others are irregular, and still others are continual. Some objectives of cash management are:

To reduce the need to borrow and if needed, to borrow at lower interest costs. To minimize idle cash balances.
To maximize the return on surplus funds.
To reduce bank charges and keep transaction costs as low as possible. Your cash management decisions must take into account your answers to the following questions: What can be done to speed up collections and stretch out cash outflows`? How can I stabilize cash flows? For example, can I add a non-seasonal product to my seasonal products? How can I earn the best return on my money?

When should I arrange for financing, and how much do I need? How are my cash flows affected during periods of inflation and recession? How much of a cash balance should I hold at different times during the year? This is especially important for a seasonal business. Where should I invest my excess cash and for what time period (e.g., 3-month treasury bill, 6-month certificate of deposit)? Are any of my cash balances restricted and unavailable for use? An example is a compensating balance at the bank, which is funds held as collateral for a loan.

Cash Management

Managing cash...
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