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The document discusses cash management, including defining cash management, describing the cash management cycle, and outlining key aspects like cash planning, investing surplus cash, and managing cash flow. It also covers objectives of cash management like ensuring payments are made on schedule and maintaining sufficient cash to avoid insolvency, and the importance of cash budgeting and forecasting.

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33 views12 pages

Presentation 1

The document discusses cash management, including defining cash management, describing the cash management cycle, and outlining key aspects like cash planning, investing surplus cash, and managing cash flow. It also covers objectives of cash management like ensuring payments are made on schedule and maintaining sufficient cash to avoid insolvency, and the importance of cash budgeting and forecasting.

Uploaded by

meditation channel
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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CASH MANAGEMENT

By ISHPREET KAUR
MBA 2 SEMETER
INTRODUCTION

CASH MANAGEMENT
 Cash + Management

 Cash Management concern with the managing of


I. Cash inflow and outflow of the firm
II. Cash flow within the firm
III. Cash balance held by the firm at a point of time by financing deficit or
investing surplus cash.

 It can be represented by cash management cycle


CASH MANAGEMENT CYCLE

Cash management seeks to accomplish this cycle at a minimum


Cost. At the same time it also seeks to achieve Liquidity &
Control
ASPECT OF CASH MANAGEMENT

Cash
planning

Managing Four Investing


the cash surplus
flow Aspect cash

Optimum
cash level
 Cash planning :Cash flow planning is intended to ensure that a business
has enough money set aside to deal with any potential unexpected expenses

 Investing surplus cash: A cash surplus is the cash that exceeds the cash
required for day-to-day operations.

 Optimum cash level : It is to be remembered that the optimum cash


balance is the balance where cost of carrying or opportunity cost becomes
equal to the cost of not carrying or transaction cost.

 Managing the cash flow : Cash flow management is tracking and


controlling how much money comes in and out of a business in order to
accurately forecast cash flow needs.
MOTIVE FOR HOLDING CASH
 The Motives for Holding Cash is simple, the cash inflows and outflows are not
well synchronized, i.e. sometimes the cash inflows are more than the cash
outflows while at other times the cash outflows could be more.

 Transaction Motive: The transaction motive refers to the cash required by a


firm to meet the day to day needs of its business operations. In an ordinary course of
business, the firm requires cash to make the payments in the form of salaries, wages,
interests, dividends, goods purchased, etc.

 Precautionary Motive: The precautionary motive refers to the tendency of a


firm to hold cash, to meet the contingencies or unforeseen circumstances arising in
the course of business.

 Speculative Motive: The firms hold cash for the speculative purposes to avail the
benefit of bargain purchases that may arise in the future. For example, if the firm
feels the prices of raw material are likely to fall in the future, it will hold cash and
wait till the prices actually fall.
OBJECTIVES OF CASH
MANAGEMENT
 1. Useful in Making Payments According to a Schedule
 The main objective of cash management is to ensure that a company's
liabilities are paid on the due date.

 2. No Danger of Insolvency
 Sufficient cash holdings will increase the goodwill of the organization and
ensure that it can pay creditors and taxes on the due date. Hence, there is no
danger of insolvency under effective cash management.

 3. Positive Relationship with Bank


 A reasonable cash balance will be helpful in paying customers on the due date.
This means that there is no need to secure bank credit in the form of cash
credit, bank overdrafts, and discounting bills.
 4. Usefulness of Cash Discount
 A reasonable cash balance will benefit large-scale purchases. In particular,
payment of large-scale purchases in cash can be useful in exploiting cash
discounts.

 5. Good Supplier Relations


 A good cash balance is always desirable to ensure that suppliers are paid on the
due date. This will increase the creditability of the firms, which will yield
benefits in terms of the organization's future profitability.
CASH BUDGETING AND
FORECASTING
A cash budget is a document that estimates a business' cash flows over certain
periods, such as weekly, monthly or annually.

Cash budget is summary statement of the firm’s expected cash inflow & outflows
over a projected period of time

Cash forecast are needed to prepare cash budget.


ANY QUERY ?

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