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Cash Management

Essay by   •  August 17, 2011  •  Essay  •  313 Words (2 Pages)  •  1,659 Views

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Cash Management is one of the key areas of working capital management. Cash is a vital current asset for proper functioning of a business. Cash is one of the current assets of a business Cash, the most liquid asset is of vital importance to the daily operation of business firms. Crucial for the solvency of the business it is referred to as the" life blood of business." Firm needs cash to meet the needs of daily transactions, to take advantage of unexpected investment opportunities. While cash serves these functions, it is an idle resource with an opportunity cost. The liquidity provided by the holding cash is at the expense of profits that could accrue from alternative investment opportunities. Hence, the firm should plan and control cash carefully. ollows a centralised cash management system. Cash collected in the form of cheques, DD's made by the various agencies are deposited in the nearest bank and transmitted to corporate office at HYDERABAD through banks. Head offices allocate the funds to the various units depending upon the requirement. Cash budgets are prepared weekly and monthly.Weekly forecasts are made regarding cash inflows, which include the cash from customers export incentives etc, and cash outflow, which includes materials, excise duty, sales taxes, and personal payment. According to latest estimates 14 banks, nine nationalised and five company's banks are holding the accounts of BSCPL. Working capital management involves the relationship between a firm's short-term assets and its short-term liabilities. The goal of working capital management is to ensure that a firm is able to continue its operations and that it has sufficient ability to satisfy both maturing short-term debt and upcoming operational expenses. The management of working capital involves managing inventories, accounts receivable and payable, cash.

To pay current liabilities as they fall due. This implies a clearly designed risk policy to determine the required liquidity level.

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