09 Liquidity

09 Liquidity - Prentice-Hall Inc The Need for Liquidity...

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Prentice-Hall, Inc. 1 Chapter 5 Cash or Liquid Asset Management The Need for Liquidity • Liquidity offers __________ – enables you to have immediate access to funds – keeps you from tapping into investments Risks associated with liquid assets – ________ trade-off -- higher liquidity means lower returns – _________ risk -- cash on hand is easier to spend “Banks” or Deposit-type Financial Institutions • Commercial banks – Personal and business loans (i.e. First National Bank) • Savings and loan associations – Generally for home mortgages • Savings banks – Generally in Northeastern United States • Credit unions – Similar services as banks (i.e. UGA Community Credit Union) Non-deposit-types of Financial Institutions • Mutual funds – Short term money market mutual funds provide better % with minimal risk • Stockbrokerage firms – Now offer credit cards, money market mutual funds On-Line Banking and “Net” Banks • On-line banking offers account access via personal computer; convenience at a fee. “Net” banks are Net banks are electronic banks that pay more for deposits, but have no local branch.
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Prentice-Hall, Inc. 2 Cash Management Alternatives Listed most to least liquid 1. _________ accounts 2. Savings accounts 3. __________ deposit accounts 4. Certificates of deposit 5. _________ mutual funds Cash Management Alternatives (cont’d) 6. Asset management accounts 7. U.S. ________ bills
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This note was uploaded on 06/06/2011 for the course HACE 3200 taught by Professor B during the Spring '09 term at UGA.

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09 Liquidity - Prentice-Hall Inc The Need for Liquidity...

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