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    Cash and Marketable Securities Management

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    RAIZA GRACE OAMIL
    This document discusses cash and marketable securities management. It outlines three motives for holding cash: transactions, speculative, and precautionary. It then discusses managing cash collection and disbursement, with the goals of maximizing available cash while avoiding insolvency. It explains how collection and disbursement policies aim to speed up collections and slow payments. Finally, it discusses internal controls needed for cash disbursement and analyzing the costs and benefits of cash management strategies.

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    Cash and Marketable Securities Management

    Uploaded by

    RAIZA GRACE OAMIL
    10 views13 pages
    This document discusses cash and marketable securities management. It outlines three motives for holding cash: transactions, speculative, and precautionary. It then discusses managing cash collection and disbursement, with the goals of maximizing available cash while avoiding insolvency. It explains how collection and disbursement policies aim to speed up collections and slow payments. Finally, it discusses internal controls needed for cash disbursement and analyzing the costs and benefits of cash management strategies.

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    This document discusses cash and marketable securities management. It outlines three motives for holding cash: transactions, speculative, and precautionary. It then discusses managing cash collection and disbursement, with the goals of maximizing available cash while avoiding insolvency. It explains how collection and disbursement policies aim to speed up collections and slow payments. Finally, it discusses internal controls needed for cash disbursement and analyzing the costs and benefits of cash management strategies.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    10 views13 pages

    Cash and Marketable Securities Management

    Uploaded by

    RAIZA GRACE OAMIL
    This document discusses cash and marketable securities management. It outlines three motives for holding cash: transactions, speculative, and precautionary. It then discusses managing cash collection and disbursement, with the goals of maximizing available cash while avoiding insolvency. It explains how collection and disbursement policies aim to speed up collections and slow payments. Finally, it discusses internal controls needed for cash disbursement and analyzing the costs and benefits of cash management strategies.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 13

    Cash and Marketable

    Securities Management
    Motives for Holding Cash
    • Transactions Motive -- to hold cash to satisfy
    normal disbursement collection activities
    associated with a firm's on-going operation
    • Speculative Motive -- to hold cash as a safety
    margin to act as a financial reserve
    • Precautionary Motive -- to hold cash in order
    to be able to take advantage of bargain
    purchases that might arise, attractive
    interest rates and favorable exchange rate
    fluctuations.
    Managing Cash Collection and
    Disbursement
    • Cash management refers to the collection,
    concentration, and disbursement of cash. The goal
    is to manage the cash balances of an enterprise in
    such a way as to maximize the availability of cash
    not invested in fixed assets or inventories and to do
    so in such a way as to avoid the risk of insolvency
    • Cash collection and disbursement policies are
    designed to reduce a firm’s liquid asset balances by
    exploiting imperfections in the collection and
    payment process.
    • The objective is to speed up collections and slow
    down disbursements.
    • The primary objective of cash collection
    involves expediting collections by reducing the
    lag between the time customers pay their bills
    and the time the checks are collected.
    • The primary objective of cash disbursement is
    to slow payments so that the firm can keep
    the funds invested or in the bank as long as
    possible.
    • Expediting collections and slowing
    disbursements help increase a firm’s cash
    balance and provide it with funds to use for
    other profitable investments.
    Collection Float

    Mail Processing Availability


    Float Float Float

    Deposit Float

    Collection Float: total time between the mailing


    of the check by the customer and the availability
    of cash to the receiving firm.
    Mail Float

    Customer Firm
    mails check receives check

    Mail Float: time the check is in the mail.


    Processing Float

    Firm Firm
    receives check deposits check

    Processing Float: time it takes a company


    to process the check internally.
    Availability Float

    Firm Firm’s bank


    deposits check account credited

    Availability Float: time consumed in clearing


    the check through the banking system.
    Deposit Float

    Processing Float Availability Float

    Deposit Float: time during which the check


    received by the firm remains uncollected funds.
    Control of Disbursements
    Firms should be able to:
    - generate daily detailed information on balances,
    receipts, and disbursements.
    What Internal Controls Are Needed
    for Cash Disbursement?
    - Segregation of Duties
    - Authorization and Processing of
    Disbursements
    - Managing Restricted Funds
    - Check Signing
    Cost and Benefit of Cash
    Management
    Purposes :
    • To verify that an investment’s (or a project’s)
    benefits are more than it’s costs
    • To select an investment (or a project) by
    comparing their benefits over costs ratios.

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