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Meaning
Cash Planning
Managing the Cash Flows
Optimum Cash Level
Investing Idle Cash
Financial Management 2nd Edition
By Paresh Shah
Biztantra
Maintaining An Optimum
Cash Balance
To answer these questions, two models of
optimum cash balance are discussed in the
following paragraphs:
Baumol Model
Miller ~Orr Model
Controlling Disbursements
Trade credit
delaying disbursements results in maximum
availability of funds.
Cash Budget
Cash budget is a schedule to record cash inflows and outflows over a
period of time in order to locate the timing and magnitude of cash
surplus and cash shortage.
Some factors which cause a variation between the Proforma Income
Statement and the Statement of Cash Inflows and Cash Outflows are
discussed below:
Sales shown in the income statement may not be realized fully as cash until in a
subsequent period.
Payment to suppliers of materials as an expense in income statement may not
involve actual cash payments within the same period.
Cash receipts from sales of fixed assets are not considered in the income
statement as they are not an operating income, but this actually increases the
availability of cash.
Charges against profit such as amortization of patent, goodwill, etc., do not
require a cash expenditure.
Cash Forecasting
Cash forecasts are essential to prepare cash
budgets
Short-term forecasts