Determining optimum liquid balance, Financial Management

Assignment Help:

Q. Determining Optimum Liquid Balance?

Liquid balance (balance of cash and marketable securities) must be maintained at the optimum level. It is the level which gives the minimum cost of holding the liquid balance. Determination of such a level is very important for an efficient cash management. If the liquid balance exceeds the required balance, it remains idle and, therefore, it involves opportunity costs in the sense that the amount could 1ij have been put to more effective use. None the less, 8 liquidity position of the enterprise becomes more sounds. On the other hand, if liquid balance is short of the requirements, the firm may have to incur shortage costs. The firm may be required to sell its fixed investments or it may have to resort to fresh borrowings' total Cost Opportunity costs Shortage.


Related Discussions:- Determining optimum liquid balance

Return enhancement on investment, Return Enhancement can be explained...

Return Enhancement can be explained using following heads: Use of a Valuation Model: An investor having access to a bond valuation model can bu

Corporate debt, which critically examines the benefits and risks to a compa...

which critically examines the benefits and risks to a company, of incorporating corporate debt into a portfolio of equity and debt.

Explain the concept of competitive advantage, There are dissimilar views on...

There are dissimilar views on how an organisation can gain competitive advantage, but contemporary research is placing greater emphasis on the resource-based view. Expl

OPERATING CYCLE, DISSCUSS THE APPLICABILITY OF AN OPERATING CYCLE IN A VEGE...

DISSCUSS THE APPLICABILITY OF AN OPERATING CYCLE IN A VEGETABLE GROWING BUSINESS IN UGANDA?

Criticism of wealth maximization, Q. Criticism of Wealth Maximization? ...

Q. Criticism of Wealth Maximization? i) The objective of wealth maximization is not, necessarily, socially desirable. ii) There is some controversy whether the objective of

State the concept of overtrading, State the concept of Overtrading Over...

State the concept of Overtrading Overtrading can result in insolvency which means companies have severe cash flow problems. This means that a thriving company, which may look v

Explain life insurance in detail, Question 1 Insurance is protection again...

Question 1 Insurance is protection against possible financial loss. Explain life insurance in detail Question 2 Mutual funds are a composite of stocks, bonds, and securities,

Describe a.i.g''s business model and structure, A.I.G. is often called the ...

A.I.G. is often called the largest insurance entity in the world. A.I.G.'s total assets were $860 billion on 12/31/2008 (dwarfing any other insurance entity) with 116,000 employees

Define the negative consequences of a company holding, What are the negativ...

What are the negative consequences of a company holding too much cash? A company holding so much cash would be giving up the opportunity to invest much more in income producing a

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd