CASH MANAGEMENT

Presenters
YONG OI KEI (TP035635)
FOO HUI QIAN (TP035431)
LOH POH YEE (TP035401)
VENESSA CHIN LI SYAN (TP034863)
LIEW MEI YAN (TP034937)
Motives for holding cash:
The Transaction Motive.
-Balances held for transaction purposes allow the firm to meet its cash
needs that arise in the business.
The Precautionary Motive.
-Precautionary balances serve as butter.
The Speculative Motive.
-Cash is held for speculative purpose in order to take advantage of
potential profit making situation.
Journal tittle: Why Do Firms Hold Cash?

Background: The study was about the motives of holding cash on

profitability by corporate firms.

Findings: If cash management is monitored well, these firms achieve

the desired motives of holding cash.
Cash Budget

The purpose of cash budget

Is a management plan

There are 3 main components to create cash budget

Time period
Desired cash position
- Estimated sales and expenses
Journal Title: How to prepare a cash
budget?
Background: To study the purpose of cash budget and how to create
cash budget.
Finding: Cash budget is an essential planning tool for management
decisions.
Liquidity

Cash is important as it provides needed protection because of its

liquidity.
Liquidity means your funds can be immediately accessible.

There are three trade-offs regarding cash management:

Risk-return trade off
Spending- investment risk trade off
Return-time expended trade off
Journal Title: Cash Management and
profitability of corporate firm
Background: This study was about cash management and profitability
of firms. All over the world, various corporate firms highly recognized
the importance of cash management since it helps in increasing
profitability
Findings: Optimal amount of liquidity is determined and determine
the appropriate cash balance which is the assessment of trade off
between benefits and cost of liquidity is for profit maximization
Cash Flow

Primary indicator of a businesss financial health

Help protect the financial security of organization

Inflows Outflow
- Receipt of bank loan - Loan repayment
- Shareholder investment - Dividend payment
Journal title: Operating cash flow and
creditworthiness assessment
Background: To test whether cash flow rations can improve firm
assessment and better predict financial distress
Findings:
- Medium-sized Italian companies shows that cash flow rations not
improving firm assessment
- Instead, using cash flow rations with financial rations can enhance
the performance of business failure prediction model
Cash Flow Forecasting

financial management
Planning its future cash requirement
To avoid a crisis of liquidity
Journal tittle: Cash flow forecast for
South African firms
Background: applying models in the extant literature that
have been used to forecast operating CF to predict the CF
of South Afican firms listed on the Johannesburg Stock
Exchange
Findings
some accrual terms do not enhance cash flow prediction for the
average in USA and Australia
Inclusion of more explanatory variables does not necessarily
improve the models