Financial managers prefer not to hold more cash than is necessary to run the bus

Question

Financial managers prefer not to hold more cash than is necessary to run the business. Idle cash earns very little return on investment for the shareholders. Therefore in order to manage cash efficiently, financial managers should -

Forecast the firm's expected cash flows and develop a cash budget to use in cash management.

Collect customer accounts receivables as quickly as possible (assuming minimal impact on customer relationships and sales).

Delay payments of funds it owes for as long as possible (assuming the cost of the delay is not too high).

Invest in Marketable Securities in periods of cash surpluses. and negotiate arrangements to borrow funds for periods when there may be cash deficiencies

Forecast the firm's expected cash flows and develop a cash budget to use in cash management.

Explanation / Answer

The answer is as under, In order to manage cash efficiently, financial managers should - Forecast the firm's expected cash flows and develop a cash budget to use in cash management. You don't always have to get a loan to get more cash. By monitoring your company's cash requirements you can see a pattern of cash overages and shortages for the coming months and plan accordingly.Every business has a cash flow cycle, cash flows out to pay for production expenses and accounts payable and cash flows in from receivables. Through proper cash management company can improve its liquidity and pay lower financing costs.

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.