About This Chapter
Cash & Liquidity Management - Chapter Summary and Learning Objectives
In this chapter, our instructors will introduce you to the methods companies use to manage the timing of cash transactions and the motives that can cause them to accelerate or delay these collections and payments. These lessons were designed by expert instructors and include key terms highlighted in bold. In this chapter you'll learn about:
- Reasons for holding cash
- The definition of cash float
- Cash collection and concentration
- Management of cash disbursements
- Investment of idle cash
- Target cash balance
|Motives for Holding Cash||Learn why companies hold cash and the costs associated with cash management.|
|What is Cash Float? - Definition & Types||Discuss types of cash float and float management.|
|Cash Collection & Concentration: Definition & Components||Look into the mechanics of cash collection and concentration.|
|How to Manage Cash Disbursements||Discover different types of accounts used to manage cash disbursements and increase float.|
|Investing Idle Cash||Examine reasons for a temporary cash surplus and investment instruments used to capitalize on them.|
|How BAT & Miller-Orr Models Influence Target Cash Balance||Study the formulas used to determine the perfect amount of cash to have on hand.|
1. Motives for Holding Cash
As companies collect revenues and pay off their expenses, hopefully they start accumulating cash. They may reinvest that cash in operations, or as we'll learn in this lesson, they may hold cash for a number of reasons.
2. What is Cash Float? - Definition & Types
When you write or deposit a check, the transaction takes time to process before the money is paid from or available in your account. Businesses are the same. In this lesson, we'll discuss types of cash float and how it is changing with technology
3. Cash Collection & Concentration: Definition & Components
When a company makes a sale, they don't always get the money right away. In this lesson, we'll examine cash collection time and how to accelerate it using the lockbox system and cash concentration.
4. How to Manage Cash Disbursements
Cash disbursements are a major part of any business, but there are ways that businesses can manage disbursements to make money. In this lesson, we'll examine how to manage cash disbursements for maximum value.
5. Investing Idle Cash
In this lesson, we'll discuss the synonymous nature of short-term securities and cash equivalents. We'll also provide examples of each and explain considerations of investing.
6. How BAT & Miller-Orr Models Influence Target Cash Balance
How can a company figure out how much cash to keep on hand? In this lesson, we'll look at two major models for figuring out the optimal cash balance for a business: the BAT model and the Miller-Orr model.
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Other chapters within the Finance 101: Principles of Finance course
- Introduction to Corporate Finance
- Financial Statements, Taxes & Cash Flow
- Financial Statement Basics
- Long-Term Financial Planning & Growth
- Introduction to Valuation Methods
- Discounted Cash Flow Valuation
- Interest Rates & Bond Valuation
- Stock Valuation
- Net Present Value & Investment Basics
- Capital Investment Decisions
- Accounting Risk & Return
- Return, Risk, & the Security Market Line
- Options & Corporate Finance
- Cost of Capital
- Financial Leverage & Capital Structure
- Dividends & Dividend Policy
- Short-Term Financing & Planning
- Credit & Inventory Management
- International Corporate Finance
- Studying for Finance 101