What are the objectives of cash management?


0

Motives for holding cash
1.   Transaction motive

Advertisement

Firms need cash to meet their transaction needs. The collection of cash (from sale of goods and services, sale of assets, and additional financing) is not perfectly synchronized with the disbursement of cash (for purchase of goods and services, acquisition, of capital assets, and meeting other obligations. Hence, some cash balance is required as a buffer.

2.   Precautionary motive

There may be some uncertainty about the magnitude and timing of cash inflow from sale of goods and services, sale of assets, insurance of securities. Like wise, there may be uncertainty about cash inflow on account of purchases and other obligations. To protect itself against such uncertainties a firm may require some cash balance.
 
3.   Speculative motive

Firms would like to tap profit making opportunities arising from fluctuations in commodity prices, securing prices, & interest rates. Cash-rich firms is better prepared to exploit such bargains may carry additional equity. However for most firms their reserve borrowing capacity & marketable securities would suffice to meet their speculative needs.

Advertisement
The following two tabs change content below.
We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to contact@bms.co.in.

Like it? Share with your friends!

0
BMS Team

We, at BMS.co.in, believe in sharing knowledge and giving quality information to our BMS students. We are here to provide and update you with every details required by you BMSites! If you want to join us, please mail to contact@bms.co.in.

49 Comments

Ask Us On WhatsApp
Choose A Format
Personality quiz
Series of questions that intends to reveal something about the personality
Trivia quiz
Series of questions with right and wrong answers that intends to check knowledge
Poll
Voting to make decisions or determine opinions
Story
Formatted Text with Embeds and Visuals
List
The Classic Internet Listicles
Countdown
The Classic Internet Countdowns
Open List
Submit your own item and vote up for the best submission
Ranked List
Upvote or downvote to decide the best list item
Meme
Upload your own images to make custom memes
Video
Youtube, Vimeo or Vine Embeds
Audio
Soundcloud or Mixcloud Embeds
Image
Photo or GIF
Gif
GIF format