A Study On Cash Management: Volume 23, Issue 2, July-August 2019, Available Online at

Complexity International Journal (CIJ)
Volume 23, Issue 2, July-August 2019,

Available online at http://cij.org.in/CurrentissuesDownload.aspx
Impact Factor (2019): 5.6 www.cij.org.in ISSN Online: 1320-0682.
A STUDY ON CASH MANAGEMENT

THALLADA VINAY VENKATA GOPI* Ch. RAJESH KUMAR**
PG SCHOLAR*, ASSISTANT PROFESSOR**
DEPARTMENT OF MBA, SWARNA BHARATHI INSTITUTE OF SCIENCE & TECHNOLOGY, KHAMMAM
ABSTARCT: Cash is the important current asset for the operation of business. It is main component of
working capital working capital management. A firm’s working capital consists of its investment in current
assets, which include short-term assets such as cash and bank balance inventories, receivables and
marketable securities. Cash management refers to management of cash balance and bank balance and also
includes the short terms deposits. The cash is obviously the most important current assets, as it is the most
liquid and can be used to make immediate payments. A financial manger is required to manage the cash
flows arising out of the operations of the firm for this he will have to forecast the cash inflows form sales and
out flows for costs etc. Cash is the money, which a firm, can disburse immediately without any restrictions
the cash include coins currency, Bank balances and cheques held by the firm. According to Upton “cash is
the life blood of a business enterprise its steady and healthy circle through out the entire business operation it
is the basis of the business solvency.
I. INTRODUCTION:
One of the most important factors for the failure of business firm is the financial distress, which is
especially more among small firms. An efficient management of these current assets will not only
reduce the risk of financial distress but can also make passive contribution to the profit of the firm.
These current assets involve investment of scarce and costly resources at the firm and therefore it is
appropriate to make careful analysis of investment in current assets. The present study concentrates on
the matters relating to management of cash and marketable securities.
“Money is like much, not good except it be spread” _ FRANCE BACON.
Cash is the important source for the operations of the business. Cash is the basic input needed
to keep the business moving. A major function of the financial manager is to maintain sound cash
position. Cash management refers to management of cash balance and bank balance and also includes
the short-term deposits. Cash is most liquid and can be used to make immediate payments with out
any restriction. The term cash includes coins, currency and cheques held by the firm and in its bank
balance.
Cash management is concerned with the managing of
(i) Cash flows in to and out of the firm

(ii) Cash flows within the firm and.
(iii) Cash balances held by the firm at a point of firm by financing deficit or investing surplus
cash.
It can represented by a cash
340
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COLLECTION
INFORMATION BOORROWER
CONTROL INVESTMENT
PAYMENTS
Figure Cash management cycle
I. NEED OF THE STUDY
Every company requires cash though they vary in magnitude. The need of cash cannot be
over emphasized its like blood to the organization cash is the basic input needed to keep the business
running on a continuous basis. It is also the ultimate out put expected, to be realized by selling the
service or product Manu factored by the firm.
“Every business has to maintain a cash balance to meet needs that can be managed only with
cash. The convenience and liquidity associated with deeming cash also carriage a cost however for
cash does not earn a return for the business some business hold cash equivalents such as Treasury Bill
which provide almost all of the convenience of cash but also earn return for the holder albeit one
lower than earned by the business on real projects.”
A financial manager is required to manage the cash flows arising out of the operation of the
firm for this he will have to forecast he cash inflows from sales and out flows for costs etc. This will
enable the financial manager to identify the timings as well as amount of future cash flows. Cash
management close not end here, and financial manager my also be required to identify the sources
from where cash may be procured on a short term basis or the outlets where excess cash may be
invested for a short term.
In most of the firms the financial manager who is responsible for cash management also
controls the transactions that affect the firm’s investment in marketable securities. In case of excess
cash marketable securities are purchased and in case of shortage of cash apart of the marketable
securities is liquidated to produce enough cash all these issues are important to the financial manger
for several reasons for Judicious management of cash near cash asserts and marketable securities
allows the firm to hold the minimum amount of cash necessary to meet the firm obligations as and
when they arise as a result the firm is not only able to meet its obligations but also is in a position to
take advantage of the opportunity of carrying.
II. OBJECTIVE OF THE STUDY:
The following are the objective of the study.

1. To examine cash management in “NAVADURGA MUNERALS INDUSTRES LIMITED”
2. To make necessary suggestions for improving the efficiency of cash management in
“NAVADURGA MINERALS INDUSTRIES LIMITED”.
341
III.METHODOLOGYOF THE STUDY
The present study is case study of cash management of M/s. Navadurga Mineral Industries
Limited the study cover & years from 2005-2006 to 2008-2009 the source of study is manly
secondary data obtained from annual reports & company web site
WWW.NAVADURGAINDUSTRIES.COM brief discussions were also under taken with executive of
finance and Accounts Department for obtaining clarification wherever necessary. For analysis
basically ratio analysis cash flow analysis and percentages have been used. Percentages were also
calculated to facilitate better under standing of the comparison Further whenever necessary tables and
diagrams have been depicted. Lastly for under standing the four-year figures have been compared.
The source of information for calculating the said percentage and ratio had been the annual reports
obtained directly from the company.
LIMITATIONS OF THE STUDY
The study is based on ratios and percentages from information available in financial
statements. However the topic under the study may not be free from limitations due to certain factors.
The major limitation of the project under study was time since it was to be completed with in a short
period exhaustive study was not possible. Since only one company was studied the findings cannot be
generalized.
IV. CHAPTERIZATION OF THE STUDY
The study is divided in to five chapters the first being introduction followed by detailed
explanation of cash management as second chapter. The third chapter is company profile. The fourth
chapter is analysis of cash management in M/S. NAVADURG MINERAL INDUSTRIES
LIMITED. The fifth chapter is conclusions & suggestions.
V. FUNCTIONS OF CASH MANAGEMENT
The management of cash is particularly important because it brings into sharp focus the trade-off
between risk and returns faced by a financial manager. If cash is not available to meet bills as they
fall due, the ultimate risk is faced the risk of bankruptcy. Economic theory has now established that
business firms or individuals have four primary motives for holding cash- the transaction motive, the
precautionary motive the speculative motive and the compensation motive.
Transaction motive: -
Business firms as well as individuals keep cash because they require it for meeting demand for
cash arising out of day to day transactions. In order to meet the obligation for cash flows arising out
of course of business, every firm has adequate cash balance. A firm requires for making payment for
purchase of goods and services supplier of goods and all other operational expenses are paid in cash.
Interest on borrowings taxes to government and dividends to share holders are also payable in cash.
These cash flows are met out at cash in flows arising out of cash sales or recovery from the
debtors. However, the inflows pay not always be equal to cash out flows when the necessity of
keeping a minimum cash balance to meet payment obligations arising out of expected transaction is
known as transaction motive for holding cash. In a normal situation both the inflows and out flows
and hence also the net difference tend to increase or decrease in direct proportion to the level of sales.
Precautionary motive: -
The precautionary motive for holding cash is based on the need to maintain sufficient cash to act
as a cushion or butter against unexpected events. In spite of making best efforts, the future cash flows
can not be ascertained with 100% accuracy. One never knows about the happening of natural
342
calamities or sudden increase in the cost of raw materials or other facts. Such events may seriously
interrupt even the best planned financial plan and thus may temporarily make the cash budget
ineffective and non-assistant therefore a firm should maintain larger cash balance than required for
day to day transactions in order to ovoid any unforeseen situation arising because of insufficient cash.
The necessity of keeping a cash balance to meet any emergency situation. The amount of cash a
firm must hold for transaction and precautionary depends upon.
(i) Degree of predictability of its cash flows.

(ii) Its willingness and capacity to take risk of running short cash only.
(iii) Available immediate borrowing powers.
Speculative motive: -
Cash may be held for speculative purposes in order to take advantage of potential profit making
situations. A firm may come across an unexpected opportunity to make profit, which is not usually
available in normal business routine. The firm’s desires to keep some cash balance to capitalize on
opportunity of making an unexpected profit is known as speculative motive. The speculative motive
provides a firm which sufficient liquidity to take advantage of unexpected profitable opportunities that
may suddenly appear (and just as suddenly disappear if not capitalized immediately).
Compensation motive: -Commercial banks require that in every current account there should always
be a minimum cash balance. Presently, this minimum cash balance various from Rs 3000 to Rs 5000.
This amount remains as a permanent balance with bank so long as the current account is operative. It
is become a sort of investment by the firm at bank in order to avail the convenience of Current
Account, the minimum cash balance must be maintained by the firm and this provides the
compensation motive for holding cash.
Out of different motives the transaction motive is the most oblivious one and is formed in every
firm. Even the precautionary motive is common and a firm maintains cash balance both for the
transaction motive and the precautionary motive.
VI. OBJECTIVES OF CASH MANAGEMT
There are two objectives of cash management.

(i) To meet the cash disbursement needs as per the payment schedule.
(ii) To minimize the amount locked up as cash balances.
As a matter of fact both the objectives are mutually contradictory and there fore. It is a challenging
task for the finance manager to reside then and to have the best in this process.
DATA INTERPOLATION:
The present study includes the fallowing aspects of cash management.
1. Size of cash.
2. Components of cash balances.
3. Control of cash flows.
4. Operational adequacy of cash.
5. Cash flow statement and
.
SIZE OF CASH: - The Size of Cash to current assets for four years.
343
CASH SIZE IN CURRENT ASSETS
Current assets 2005-2006 2006-2007 2007-2008 2008-2009
Amount % Amount % Amount % Amount %
Inventories 4650000 23.77 4285841 23.69 2396737 20.18 2715535 19.1
Sundry creditors 8193631 41.89 6830907 37.8 5075948 42.75 8425023 59.13
Cash bank 5274479 26.97 5713231 31.58 1736122 19.62 1887500 13.25
Loans &advances 1437163 7.35 1256961 6.95 2665231 22.45 1221079 8.56
Total 19555273 18086940 11874038 14249137
Table 1
SOURCE: - From annual Reports.
Figure 1
Inventories
Sundry creditors
Cash bank
Loans &advances
Interpretation; -
During the year 2005-06 the cash balance in 26.97% of total current assets this is second to debtors.
2nd year 2006-07 cash balance in next to sundry debtors and it is 31.58% of total current assets. The
cash balance during 2007-08 and 2008-09 showed declining trend.
344
COMPOSITION OF CASH AND BANK BALANCES
Table 2
Cash and bank balances 2005-2006 2006-2007 2007-2008 2008-2009
Amount % Amount % Amount % Amount %
Cash in hand 32424 0.61 62277 1.09 90998 5.21 107311 5.71
Cash at scheduled bank 5242055 99.39 5650954 98.91 1645124 94.79 1780189 94.29
5274479 5713231 1736122 1887500
SOURCE: - From Annual Reports.
Figure 2
Cash in hand
Cash at scheduled bank
Interpretation; -
In the total cash, cash in hand was 0.61% and cash at bank was 99.39% in the year 2005-06. In the
year 2006-07, 2007-08 and 2008-09 there was increase in cash in hand balance. The balance of cash
in hand in the 2008-09 was 5.71%. The cash at bank balance the year of study was more than 94%.
345
Control of Cash Flows:
The twin objectives of cash management are to maintain liquidity and at the same time to minimize
the cash molding. This implies that one should optimize cash holdings without imparting the over all
liquidity needs of the concern. This objective could be achieved by following a tight control over
cash flows. Teen sure as to how far the cash controls are working well at the said company the
following ratios are calculated.
(A) Cash to total current Assets.
(B) Cash to sales..
(C) Cash to debt serves Ratio
(D) Cash to current Liabilities.
(E) Internal measure ratio
Cash to total current Assets: -

Though this ratio has been calculated earlier and mention is made about in tables an attempt to
analyze the ratio is done here idle cash balances in a concern affect profitability and involve cost of
retaining it. The ratio of cash to total current assets may be inter prated as the lower the ratio. The
greeter may be profitability of the concern. A downward trend in this ratio over a period of time
indicates a higher control of cash; where as on upward trend reveals a slack control over cash
resources. But as far the quantum of cash balance is concerned there is no standard norm it all
depends upon ones own experience. However since current liabilities are not expected to exceed one-
half at the current assets, cash percentage should not run under 10 to 20 percent of the same. In cases
where debtors and cash are taken together then the same together should be 50% of the total current
assets. In general the cash balances should range between 5-10% of current assets. In an analysis
done on this basis the cash balance position of “M/s. NAVA DURGA MINERALS INDUSTIES
LIMITED” has been adverse.
V. CONCLUSIONS
It is a case study in “NAVA DURGA MINERALS INDUSTRIES LIMITED” of Cash

Management
1)The cash size in total Current Assets during the year 2005-06 is 26.97%. It is second to sundry
debtors. It increased to 31.55% in Accounting year 2006-2007. For remaining years. 2007-08
and 2008-09. The Cash Balance started a declining trend. Indicating a good trend. Interval
measure ratios are not constant. The average daily cash operating expenses are 152 days in the year
2005-2006. It is increased to 184 days in 2006-2007 and it is decreased to 106 days in the year
2007-2008 and also increased to 134 days. In the year 2008-09 a lower interval measure ratio is
good for the organization.
2) Cash to total Current Assets Ratio should range range between 5% to 10%. But for all the year the
cash balances are more than5% to 10% of the total Current Assets. The highest Cash Balance was
during the year 2006-2007 which was 31.59%. But in remaining years it is decreasing continuously.
It has decreased to 13% during the year 2008-2009. Though there is decrease in the ratio,
management has to still concentrate for four years has shown wide range of fluctuation. Though sales
have not increased significantly. Yet, the ratio showed a declining trend. For second year ratio has
increased from 15.476% to 22.372% during two years (2007-2008) and (2008-2009) there was
decrease in the ratio.
346
4) Cash to debt Service ratio should be with it indicates long-term solvency of the firm during the year
2008-2009. Its higher cash to debt service ratio during the year was 1.94. It is better to Organization.
Company analysis was due to losses incurred during the year.
5) During the year (2006-2007) highest cash to Current ratios was noticed in 2006-07 the ratio was
1.18%, which is satisfactory. But it is not constantly for remaining years. In the year (2008-2009) a
lowest cash ratio was observed it was .29. It is not good for the firm. This ratio has to be reduced.
6) Interval measure ratios are not constant. The average daily cash operating expenses are 152 days
in the year 2005-2006. It is increased to 184 days in 2006-2007 and it is decreased to 106 days in
the year 2007-2008 and also increased to 134 days. In the year 2008-09 a lower interval measure
ratio is good for the organization.
7) Cash turnover ratio showing might cash ratio during the year 2008-2009. It indicates efficient
management Assets. In the Accounting year 2006-2007. The ratio is 4.47%. It increased to13 .37%
in the next year (2007-2008).
8) Highest no. of days holding period is 80.54 during was noticed the year (2006-2007). But it is not
good for organization. It has increased when compared to the last year (2005-2006). Cash number of
days holding period has decreased in (2007-2008) is 2693 and further decreases during the year 2008-
2009, which is 18.69 days. These ratios coupled with turnover, showing decrease is an indication of
good cash management.
SUGGESTIONS
1) Cash to total current assets for all the years is more than 5 to 10 %. These ratios are in
decreasing trend it is good for organization. The same may be continued.
2) Cash to debt Service ratio during the year (2008-2009) was 1.94.
3) M/s. NAVA DURGA MINERALS INDUSTRIES LTD Company should prepare cash flow
statements regularly because it is a vital analytical tool in the hands of the financial
management. It helps the management in the proper management of the cash.
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Economics, 6, 71-83.
 Ang, J., & Peterson, P.P.(1984). The Leasing Puzzle, Journal of Finance, 39(1), 1055-1055.
 Bloor, J. (1972). New System is Very Big Credit, Accountancy Age.
 Carszlaw, C.A., & Mills, J.R. (1991). Developing Ratios for Effective Cash Flow Statement
Analysis, Journal of Accountancy, November, 63-70.
 Callimaci, A., & Fortin, A., & Landry, S. (2011). Determinants of Leasing Properties in
Canadian Listed Companies, International Journal of Managerial Finance, 7(3), 259-283.
 Chittenden, F., & Bragg, R. (1997). Trade Credit Cash-Flow and SMEs in the UK, Germany
and France, International Small Business Journal, 16, 22-35.
 Collins, J., & Jarver, R. (2000). Financial Information: The Vital Spark in the Small
Enterprise Management, Paper Presented at the 23rd ISBA National Small Firms Policy and
Research Conference, Small Firms: Adding the Spark, The Robert Gordon University,
Aberdeen, 15-17 November.
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Vital Spark in the Small Enterprise Management, Paper Presented at the 23rd ISBA National
Small Firms Policy and Research Conference, Small Firms: Adding the Spark, The Robert
Gordon University, Aberdeen, 15-17 November.
 Deloof, M. (2003). Does Working Capital Management Affect Probability of Belgian Firms?
Journal of Business Finance & Accounting, 30(3), 573-587.
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Issues, Paper Presented at the International Council for Small Business Conference,
Washington, DC, 15-18.
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Small Business and Enterprise Development, 17(1), 123-138.
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Decision-Making Methods in Simulation Modeling, Management Decision, 40(1), 64-73.
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Complexity International Journal (CIJ)

Volume 23, Issue 2, July-August 2019,

A STUDY ON CASH MANAGEMENT

PG SCHOLAR*, ASSISTANT PROFESSOR**

DEPARTMENT OF MBA, SWARNA BHARATHI INSTITUTE OF SCIENCE & TECHNOLOGY, KHAMMAM

“Money is like much, not good except it be spread” _ FRANCE BACON.

Cash management is concerned with the managing of

(i) Cash flows in to and out of the firm

Figure Cash management cycle

I. NEED OF THE STUDY

II. OBJECTIVE OF THE STUDY:

The following are the objective of the study.

III.METHODOLOGYOF THE STUDY

V. FUNCTIONS OF CASH MANAGEMENT

(i) Degree of predictability of its cash flows.

VI. OBJECTIVES OF CASH MANAGEMT

There are two objectives of cash management.

The present study includes the fallowing aspects of cash management.

Current assets 2005-2006 2006-2007 2007-2008 2008-2009

Amount % Amount % Amount % Amount %

Inventories 4650000 23.77 4285841 23.69 2396737 20.18 2715535 19.1

Total 19555273 18086940 11874038 14249137

SOURCE: - From annual Reports.

COMPOSITION OF CASH AND BANK BALANCES

Amount % Amount % Amount % Amount %

5274479 5713231 1736122 1887500

SOURCE: - From Annual Reports.

Cash to total current Assets: -

It is a case study in “NAVA DURGA MINERALS INDUSTRIES LIMITED” of Cash

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