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    Cash flow management involves monitoring, analyzing, and optimizing a company's net cash flow. It is important because 82% of businesses fail due to poor cash flow management. Cash flow management allows a company to estimate cash levels, repay debts on time, support expansion, reduce stress, take advantage of discounts, and plan surplus investing. There are two main models for cash flow management - Baumol's model which is based on inventory control and sets an economic conversion lot size, and Miller & Orr model which uses statistics and sets lower and upper control limits for cash balances.

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    Cash flow management involves monitoring, analyzing, and optimizing a company's net cash flow. It is important because 82% of businesses fail due to poor cash flow management. Cash flow management allows a company to estimate cash levels, repay debts on time, support expansion, reduce stress, take advantage of discounts, and plan surplus investing. There are two main models for cash flow management - Baumol's model which is based on inventory control and sets an economic conversion lot size, and Miller & Orr model which uses statistics and sets lower and upper control limits for cash balances.

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    6 views8 pages

    Review of Literature

    Uploaded by

    Prabhas Anil
    Cash flow management involves monitoring, analyzing, and optimizing a company's net cash flow. It is important because 82% of businesses fail due to poor cash flow management. Cash flow management allows a company to estimate cash levels, repay debts on time, support expansion, reduce stress, take advantage of discounts, and plan surplus investing. There are two main models for cash flow management - Baumol's model which is based on inventory control and sets an economic conversion lot size, and Miller & Orr model which uses statistics and sets lower and upper control limits for cash balances.

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    of 8

    CASH FLOW MANAGEMENT

    K.MADHU SUDHAN REDDY


    18L31E0033
    INTRODUCTION

     The management and analysis of a company's


    cash flows. Careful cash flow management
    allows a company to estimate the amount of
    cash that it will have on hand at any one time
     Accourding to a study performed by U.S Banks
    82% of businesses fail due to poor
    management of cash flows
    DEFINITION

     “The process of monitoring, analyzing, and


    optimizing the net amount of cash receipts
    minus cash expenses”-Jessie Hagen
    NEED FOR HOLDING CASH

     TRANSACTION MOTIVE
     PRECAUTIONARY MOTIVE
     SPECULATIVE MOTIVE
    ADVANTAGES OF CASHFLOW MANAGEMENT

     Repayment of debts
     Helps while expantion

     Less stress

     Plan for investing surplus

     Take advantage of money-saving opportunities


    such as cash discounts
    MODELS OF CASH MANAGEMENT

     BAUMOL’S MODEL :
     This model is based on inventory control
    model(EOQ).
     Economic conversion lot :

    ECL = √2FC/O
    MODELS OF CASH MANAGEMENT

     MILLER & ORR MODEL :


     It is a statistical model where the behaviour of
    cash balance is given.
     Limitation of Baumol model has been
    overcame.
     According to this model cash balances
    fluctuates between lower & upper control limits

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