From the course: Finance for Non-Financial Managers
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Strategies for cash management
From the course: Finance for Non-Financial Managers
Strategies for cash management
- Why should a business have any cash at all? Now, as we know, cash is a low yielding asset. You don't make a lot of return on cash, so you don't want to have too much. But then again, you don't want to have too little cash either. Bills have to be paid in cash. Employees have to be paid in cash. Rent and insurance have to be paid in cash. We've got to manage our cash to ensure that we have it when we need it. That requires computers and cash management staff. That also requires financial people to create projections to ensure that we can forecast cash needs so that we have enough cash when we need it. As some of us know from personal experience, a cash shortfall is certainly inconvenient and is also potentially costly. For example, if a company has promised to pay its employees on Friday, and when Friday rolls around, there's no cash in the company bank account, those are going to be some irate employees. So a business has to make sure it always has sufficient cash. Okay, then why…
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