Cash Management v2

8/7/2019 Cash Management v2

http://slidepdf.com/reader/full/cash-management-v2 1/39

Presented bySneha Sahu (45)

Rupali Thenge (55)

Nilesh Isal (15)

Sameer Borde (05)Hema Sayam (47)

Individual and business processes receipts and

payments in a more organized and efficient

manner

Cash management trust

Arranged in an accounting department

Investment professional handles

Transaction motive

Precautionary motive

Speculative motive

Compensating motive

Meeting payment schedules

Minimizing funds committed to cash balance

Synchronization of cash flows

Short costs

Excess cash balance costs

Procurement and management

Uncertainty and cash management

To minimize

o Fixed cost of transactions

Opportunity cost of holding

A position when cash balance is in most ideal

proportion

o To invest

o Sufficient liquidity for future needs

To determine the optimum amount of transaction cash

under conditions of certainty

Objective - To minimize the sum of the fixed costs of

transactions and the opportunity cost of holding cash

balances

There are 2 costs associated with this model:

a) Cost of converting marketable securities into cash

b) Opportunity cost

Cost of converting marketable securities into cash

Total conversion cost per period = T*b

Where,

b = cost per conversion

T = total cash needs for the time period involvedC = Value of marketable securities sold at each

conversion

Opportunity Cost

Total conversion cost per period = i * C

Where,

i = interest rate that could have been earned

C/2 = Average cash balance

Total Cost is expressed as

b [T/C] + i [C/2]

To minimize the cost, the model attempts to determine the

optimal conversion amount, that is, the cash withdrawal which

costs the least.

C = sqrt (2bT / i)

To determine the optimum amount of transaction cash

under conditions of uncertainty

The objective is to determine the optimum cash balance

level which minimizes the cost of cash management

Symbolically,

C = b * E (N) + i * E (M)

where b = the fixed cost per conversion

E (M) = the expected average daily cash balance

E (N) = the expected no of conversions

t = no of days in the period

i = the lost opportunity costs

C = total cash management costs

MO model assumes that cash balances randomly fluctuate

between upper bound (h) and lower bound (l)

When the cash balances hit the upper boundo Too much cash and company should buy marketable

securities to bring cash balances back to the optimal

bound (z)

When the cash balances hit zero

o They must be return to the optimum bound z by

selling/converting securities into cash

Days of the Month

Lower Limit

Upper Limit

Sell Securities

Buy Securities

According to MO model, the optimal cash balance z can be

expressed as

z = Sqrt (3*b*r2 / 4 * i)

where r2 = the variance of daily changes in cash balances

1. Short-term cash forecasting or Cash Budgeting² few days

to 1 year.

Methods³1) Receipts & payment method

2) P & L method

3) Balance sheet method

2. Long-term cash forecasting³2 to 5 years

Method² Adjusted net income method

DEFINITION:

Cash budget is an estimate of cash receipts and

disbursement for a future period of time

1. Receipts and payments Method.

2. Adjusted Profit and Loss Method.3. Projected Balance Sheet Method.

1. Receipts and Payment method

Receipts include

Total sales Interest & dividends Assets

Stocks and debentures

Payment includes:

Creditors

Payment for wages

Dividends paid

Capital expenditure- purchase of assets

Repayment of loans

Overhead expenses

RECEIPTS --- PAY MENT= Cash or Cash

Balance Deficit

If cash deficit then manager will have to arrange a

Bank Overdraft

1. Actual payment to be made next month

2. Actual timings of payment

Ex.-If the collection from sales is available only after 15th of the month, then enough cash balance must be maintained for

meeting payments for the first 15 days.

Adjusted Net Income method:

It estimates the firms need for cash at some future date andindicates whether the need can be met from internal sourcesor not.

Sources of funds- Expenses

Net income after taxes --Capital expenditure

Non cash charges --Increase in C.A

(Depreciation, Ammortisation) --Repayment of borrowing

Sale of equity shares --Dividend payment

Increase of borrowings

SOURCE ² EXPENSES =surplus/Deficit

Speedy Cash Collections

a. Encouraging the customers

b. Conversion of payments into cash

Prompt Payment by Customers

a. Prompt billing

b. Practice of offering cash discounts

Early Conversion of Payments into Cash

a. Transit or mailing time (postal float)

b. Lethargyc. Bank float

d. Deposit float

Decentralised Collection

a. Concentration Banking

b. Lock-Box System

Ready Cash Segment

Controllable Cash Segment

Free Cash Segment

Safety

Liquidity

Maturity

1) Fixed Deposits with Banks

2) Treasury Bills

3) Mutual Fund Scheme

4) Commercial Paper

5) Certificates of deposits

6) Inter-Corporate Deposits

7) Ready Forwards

8) Bill Discounting

Do Nothing

Make Ad Hoc Investment

Ride the Yield Curve

Develop Guidelines

Utilize Control Limits

Manage with a Portfolio Perspective Define the efficient frontier

Select the optimal portfolio

Follow a Mechanical Procedure

Cash Management v2

Documents

Parramatta Hot Water Consumer Cash Back 2015 v2

Financial Management: Cash Management

Cash Flow and Financing v2

International Cash Management Practices - … · International Cash Management Practices

Dreyfus Cash Management Funds - TIAA · Dreyfus Cash Management Funds Prospectus June 1, 2014 Investor Shares Dreyfus Cash Management (DVCXX) Dreyfus Government Cash Management (DGVXX)

CASH MANAGEMENT

Cash Management (TR-CM) - comsoftit.com Management (TR).pdf · Cash Management (TR-CM) SAP AG Cash Management (TR-CM) 8 April 2001 Cash Management (TR-CM) Purpose Cash Management

141124 cash management cash forecasting

Dreyfus Cash Management Funds - Sabal Trust Company · Dreyfus Treasury Securities Cash Management (DIRXX) Dreyfus Tax Exempt Cash Management (DEIXX) Dreyfus Municipal Cash Management

13 cash modernising cash management

33. calculo deuda, pagos y sobrante cash v2

Cash Pools - In Oracle Cash Management

Strategies for Achieving More Accurate Cash Flow ... · CASH MANAGEMENT AND LIQUIDITY MANAGEMENT CASH MANAGEMENT LIQUIDITY MANAGEMENT Short-term liquidity management ... COMMON CURRENT

NCR APTRATM CASH MANAGEMENT SOLUTIONSncrpr.ncr.com/web/rsdmkt/PrtMkt_CIB/V2/docs/brochures/FIN_cash... · NCR APTRA OptiCash is the core component of the APTRA Cash Management Solution