Cash Management

Cash management
 Cash mgmt is concerned with the management
of collection and disbursement of cash
,determination of optimum level of cash and
investment of surplus cash
 Motives for Holding Cash and Marketable
Securities

Cash for transaction

Precautionary motive. some of the contingencies for which
additional cash require include
Strike, Floods, failure of important customer.
Slow rate of cash collection from debtor
Speculative Motives: It means to make use of profitable
opportunities by the firm .
 Objective Of Cash Management:
 To make payment according to the Payment
Schedule
 To minimize cash Balance.
 Factors Affecting Level Of Cash
 Matching of cash Flows
 Non recurring expenses
 Cash short cost
 Cost of excessive cash balance
 Payment of loans
 Firms capacity to borrow in emergency
 Attitude of mgmt
 Efficiency of management
 Devices and methods of cash
management
 Cash Budget
 Cash Flow statement
 funds flow statement
 Cash management model
 Cash Budget
Cash budget is an important technique of planning and
controlling cash recipients and cash payments
Usefulness of cash budget
 Determination of cash requirement

 Determines about quantum and timings of cash

receipts and payments on future dates

 Help in deeming when the firm need additional

cash .and when it will have surplus cash.

 At the time of deficiency it helps to manage finance

in time
 It can help investment of surplus cash in time
 FUNDS FLOW STATEMENT

A statement of changes in financial position

summarizes for the period covered by it the changes
in the financial position including the sources from
which funds from obtained by enterprise and the
specific uses to which such funds were applied.
IMPORTANCE OF FUNDS FLOW STATEMENT
 Helpful in financial analysis
 It provides more reliable figures of profit & loss of
the business.
 It enables to know whether the funds have been
properly used.
 Helpful in proper management of Working Capital.
 Helpful in finding the answers to some important
Financial Questions
 It helps in the preparation of budget for the next
period.
 It helps a firm in borrowing Operations.
 Helpful in determining Dividend Policy.
 Useful to shareholders.
 Cash Flow statement
 A CASH FLOW STATEMENT IS NOT VERY
MUCH DIFFERENCE FROM “FUND FLOW
STATEMENT
 THE ONLY DIFFERENCE IS THAT THE TERM
“FUND” IS USED TO MEAN THE WORKING
CAPITAL WHILE PREPARING CASH FLOW
STATEMENT THE TERM FUND IS USED TO
MEAN ONLY CASH
 Need of Cash Flow Statement
 useful for short-term financial planning
 useful of preparing the cash budget
 it explains the deviations of cash from
earnings
 study of the trend of cash receipts & payments
 it explains the deviations of cash from
earnings
 comparison with the cash budget
 Cash Management Model
Managing of cash flows
Accelerating Cash collection
Concentration banking
Lock Box System
Slowing Disbursement: Avoidance of early payment
Centralized disbursement
Payment by cheque