Illustration of optimum cash balance, Managerial Accounting

M/s Sunrise Industries estimates its net cash requirement at Rs. 20 million for the subsequent year. Opportunity cost fund is 15 percent per annum of the Companies. The company will have to incur Rs. 150 per transaction while it converts its short term securities to cash. Find out the optimum cash balance. What is the sum of annual cost of the demand for optimum cash balance? How many deposits will have to be completed throughout the year?


C* =√(2bt/I)

C* = √(2 (150) (2,00,000,00)/.15)

= Rs. 2, 00,000

The annual cost will be as:

TC = I (C/2) + B(T/C)

= 0.15 +(2,00,000,00 /2)+ 150 + (2,00,000,00/2,00,000)

= 15,000 + 15,000

= Rs. 30,000

In such financial year thus, the company would have to create 100 conversions.

Posted Date: 4/9/2013 3:41:31 AM | Location : United States

Related Discussions:- Illustration of optimum cash balance, Assignment Help, Ask Question on Illustration of optimum cash balance, Get Answer, Expert's Help, Illustration of optimum cash balance Discussions

Write discussion on Illustration of optimum cash balance
Your posts are moderated
Related Questions
Project C would involve a current outlay of $50,000 on equipment and $15,000 on working capital. The investment in working capital would be increased to $21,000 at the end of the f

Control Control includes a comparison of actual performance with the plan so that deviation from the plan can be identified and corrective action taken. It can be define

Computing equivalents units and assigning costs to completed units and ending work in process; no beginning inventory or cost transferred in (30 -45min) Sue Electronics makes CD p

Illustration of Coefficient of Determination The production manager of XYZ Company is concerned about the apparent fluctuation in efficiency and wants to determine how labour c

what are the stages of operational research

Financial decisions are depends on specific considerations the major being the cash flows, liquidity and cost. Short-term working capital decisions or financial decisions are diffe

Strengths and weakness of net book value and pay back method

Markov Analysis It is a way of analyzing the current movement of some system in an effort to predict the future movement of the same system. There are two elements that must be

State performance budgeting according to carter performance According to carter performance budgets use statement of mission goals and objectives to explain why the money is be