CASH MANAGEMENT

Cash management concerned with collecting and disbursement of cash 2. Cash management includes management of cash inflow, cash outflow, estimation of cash requirement, ascertaining cost of managing cash, techniques of managing cash. 3. Cash management is done because all the transactions in the business in done in cash, so there is need for estimation of cash in future for smooth running of the business. So cash management is very important for every organization
1.

MOTIVES OF CASH MANAGEMENT

Transactions

motive

1.To meet routine cash requirements to finance transaction in the ordinary course of business 2.To balance current receipts and disbursement 3.Example: Cash payment for purchasing, operating expenses, financial charges

PRECAUTIONARY MOTIVE
1.Defensive in nature 2.Holding cash/near-cash as a cushion to meet unexpected contingencies/demand for cash 3.Floods, strikes and failure of important customers 4.Earlier settlement of bills 5.Unexpected slow down in collection of accounts receivable 6.Cancellation of some orders 7.Sharincrease in cost of row materials

SPECULATIVE MOTIVE
1.Holding cash/near-cash to quickly take advantage of opportunities typically outside the normal course of business 2.Positive and aggressive approach 3. Examplesi. An opportunity to purchase raw materials ii. A chance to speculate on interest rate movements

OBJECTIVES
1.To meet cash disbursement needs(payment schedule) 2.To minimize funds committed to cash mgt factors

FACTORS
1.Synchronization of cash flows 2. short cost 3. excess cash balance 4. procurement and management 5. uncertainty