dq 1 - Most large businesses will keep their operating cash...

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Cash management is the entire process of managing daily cash flow, receiving payment, monitoring bank balances, ensuring there are appropriate balances to pay bills and other payables, and much more. Goals can range from business to business, but most companies will have fairly similar objectives, first and foremost, always having enough liquid cash to pay current liabilities coming due. ..usually invoices from suppliers. Some companies will be highly leveraged and have debt covenants that require the company to have certain levels of cash, other companies will have no debt at all. Companies that are "cash cows" (i.e. have no real trouble bringing in enough cash to pay the bills) will be most concerned with making sure their free cash is used to generate a return.
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Unformatted text preview: Most large businesses will keep their operating cash accounts in what is called Money Market accounts, which typically earn a higher interest rate than regular savings accounts. Also, cash management involves the analysis of foreign currency and hedges against movement in other currencies. For example, if an international company does business in Japan, where it holds large balances in cash, and the company is worried the Japanese Yen is weak and will decrease in value, it should move it's cash to be held in some other currency that it thinks will be stronger and retain its value. So yes companies have different cash management goals depending on their size and profitability....
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This note was uploaded on 05/07/2010 for the course ACCOUNTING ACC225 taught by Professor Professor during the Spring '10 term at University of Phoenix.

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