Cash management is one of the key areas

of working capital.

Cash is the most liquid current asset.

Cash is the common denominator to which
all current assets can be reduced.

Cash itself does not produce goods or services.

It is used as a medium to acquire other assets.

It is other assets rather than cash which are
used in manufacturing goods or services.

The idle cash can be deposited in bank to earn
interest.
TRANSACTION MOTIVE
PRECAUTIONARY MOTIVE
SPECULATIVE MOTIVE
This refers to the holding of cash to meet
routine cash requirements.
A firm enters into a variety of transactions which
have to be paid for in the form of cash.
FOR EXAMPLE: Cash payments have to be
made for purchases, wages, taxes, dividends
and so on.
The requirements of cash balances to meet
routine cash needs is known as
TRANSACTION MOTIVE.
Precautionary motive is for holding cash as
a cushion to meet unexpected
demand for cash.
The unexpected cash needs at short notice
may be result of:
1. Floods, strikes and failure of important
customers.
2. Sharp increase in cost of raw materials.
Speculative motive is for holding cash to
quickly take advantage of opportunities
typically outside the normal course of
business.

The speculative motive helps to take
advantage of:
a. An opportunity to purchase raw materials at
a reduced price.
b. Make purchase at favourable prices.
MEETING PAYMENT SCHEDULE
MINIMISING FUNDS COMMITTED
TO CASH BALANCES


THANK YOU