By

RAVINDER SINGH

WHAT IS CASH MANAGEMENT??????

 CASH MANAGEMENT implies that all the business

generated revenues are effectively controlled and utilized in the best possible manner to result in gains for the organization.

BASIC OBJECTIVES OF CASH MANAGEMENT

To ensure availability of cash as per payment schedule And . To minimize the amount of idle cash.

CLASSIFICATION OF CASH FLOWS

Operational cash flows. Priority cash flows.

Discretionary cash flows.

Financial cash flows.

 MOTIVES FOR HOLDING CASH BALANCES..

 Transaction motive Precautionary motive Speculative motive Future requirements

Compensating balances

 COST-BENEFIT ANALYSIS OF CASH

MANAGEMENT

 Since the basic purpose of any cash management

system is to reduce the cost. Cost involved in cash management system like any other system can be broadly divided in to fixed cost and variable costs.

 Fixed costs of maintaining any system may be like

depreciationon hardware used, fixed employee cost etc. The variable cost of cash management system normally depends on the volume of funds handled by the company.

MANAGEMENT OF LIQUIDITY

 LIQUIDITY is defined as the ability of the

organization to realize value in money, the most liquid of assets. It refers ability to pay in cash, the obligations that are due.

It has two concepts ,.,,..,., Quantitative. Qualitative

 Quantitative -- quantitative includes the quantum,

structure and utilization of liquid assets.

Qualitative qualitative concept is the ability to meet

all the present and potential demands on cash in manner that minimizes cost and maximizes the value of the firm.

REASONS FOR CASH FLOW PROBLEMS

Continuous operation losses

Higher inflation rate

Non recurring expenditures Higher seasonal or cyclical sales

Over trading
Continuous growth of business Inefficient working capital management

MODELS OF CASH MANAGEMENT.

Cash management has two types of models ..
Miller and Orr model of cash management. BAUMOLS EOQ MODEL

 Miller and Orr model of cash management.

procedure to be followed in this model..

Finding out the approximate prices at which the

salable securities could be sold or bought Deciding the minimum possible levels of desired cash balance Checking the rate of interest Calculating the SD(StandardDeviation)

Miller and Orr model of cash management.

BAUMOLS EOQ MODEL

 Baumol Model of Cash Management

The Baumol model of cash management is one of

many by which cash is managed by companies. It is extensively used and highly useful for the purpose of cash management.

 Use of Baumol Model

The Baumol model enables companies to find out

their desirable level of cash balance under certainty.

HOW TO MANAGE CASH

Here are some ways to manage cash.
Setting cash balance.

Cash cycle.
Zero balance account. Money market banking. Petty cash imprest system.