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Managerial Finance Chapter 19 - Coggle Diagram
Managerial Finance Chapter 19
Why hold cash?
Transaction motive
Precautionary movie
speculative motive
Costs to hold
Opportunity cost
Agency issues
Cost not to hold
Trading costs for securities
Investing Idle cash
Buy stocks with seasonal surpluses and sell
Save cash for possible expenditures
Financial securities with maturity of > 1 year
Characteristics of short-term securities
Cash management
Target Cash Balance
Finding optimal point between carrying and shortage costs
Working Capital Policy
Flexible
Interest cost
For small firms
Restrictive
Has a portfolio of securities to meet cash needs
Trading costs
For large corp
Float
Disbursement
Writes a cheque decreasing ledger but no change in bank
Collection
cheque received leading to increase in ledger before bank change
Cash balance in ledger - cash balance at bank
Parts of Float
Processing
Mailing
availability
Float Management
Reduce collection time, and increase disbursement time
Accelerating Cash Collection
Controlled disbursement account (send cheque to articque)
Zero-balance account
Slowing Cash Dibursements
Credit terms (discounts, 2/10 n/30)
Over-the-counter system
Lockbox
E-transfer