Cash Management and Short Term Financing

Topics: Debt, Bond, Money Pages: 3 (880 words) Published: April 4, 2010

Cash Management and Short-term Financing

University of Phoenix

Cash Management and Short-term Financing
Structured cash management and efficient short-term financing are both beneficial and important for a company to remain competitive in the market; this will help increase potential profit and shareholder value with the rising stock. Cash management is a tool for the company can use to manage idle funds (cash balances) that are not generating revenue giving the company the ability to use the freed cash to build sources for short-term financing through interest building securities. Cash management techniques include marketable securities, international cash management, collection/disbursement float, and Electronic Funds Transfer. Short-term financing give the company the ability to secure cash needed for production enabling the company to maximize profitability. Short-term financing methods include inventory financing, commercial paper, trade credit, bank loans, receivables financing, foreign borrowing. Cash management Techniques Float is the difference between the recorded available cash and the amount that has been credited by the bank, this results in a time delay when dealing with banking system and the mail service and clearing checks. A company will use the float to minimize collection times and increase disbursement dates to give them more time with the cash on hand to use in interest building securities. Electronic Funds Transfer is quickly replacing the out-dated check system, with the EFT system the ease of electronically deposited funds; this reduces the lag or down time traditionally associated with the manual check. This system increases the efficiency of the banking system and decreases float times for the company. International cash management allows the company to deposit money in countries with a high interest rate returns. This allows the company to invest...
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