Setting of optimal cash balance, Finance Basics

Setting of Optimal Cash Balance

Cash is often identified like a non-earning asset since holding cash quite than a revenue-generating asset includes a cost in form of foregone interest.  Therefore the firm must hold the cash balance which will enable it to meet its scheduled payments like they fall due and give a margin for safety.  So there are several techniques used to find out the optimal cash balance.  These are like:

The Cash Budget

The Cash Budget confirms the firm's projected cash outflows and inflows over some particular period. This technique has already been discussed in another earlier course.  However the student must revise the cash budget.

Posted Date: 2/1/2013 2:14:52 AM | Location : United States







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