Question

aspects of cash management

Answer 1

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Answer 2

ASPECTS OF CASH MANAGEMENT

Cash Management has the following aspects :

 Cash Budgeting

 Cash Budget

This represents the cash receipts and cash payments and estimated cash balance for each month of the period for which budget is prepared. Cash budget is a device for controlling and coordinating the financial side of a business.

Cash budget serves the following purposes :

a) To ensure that sufficient cash is available whenever required

b) To point out any possible shortage of cash so that necessary steps can be taken to meet shortage by making arrangement with the bank for overdraft or loan,

c) To point out any surplus cash so that management can invest it in interest fetching securities.

Principles of Cash management:

The basic objectives of cash management is to reduce the operating cash requirement to the minimum possible extent without affecting the routine transactions. In particular,the objectives of cash management can be started as below.

(a)Accelerate the cash collections.

(b)Delay the cash payment.

(c)Investment of excess cash available.

(d)maintenance of minimum cash balance.

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