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Noida
Cash & Marketable Securities Management
Unit: 2
Dr. Riyazuddin
Assistant professor
Department-School of Management
Email-Id: riyazuddin.mba@niet.co.in
Qualification: Ph.D in Finance, UGC-NET, MBA & B.Com
Specialization: Finance
Total Teaching Experience: 14 Years 8 Months
Teaching Area: Accounting & Finance
End
Periods Evaluation Scheme
S. Semester
Subject Code Subject Name
No Total Credit
L T P CT TA Total PS TE PE
Specialization Group -1
3 3 1 0 30 20 50 0 100 0 150 4
Elective -5
Specialization Group -1
4 3 1 0 30 20 50 0 100 0 150 4
Elective -6
Specialization Group -2
5 3 1 0 30 20 50 0 100 0 150 4
Elective- 3
Specialization Group -2
6 3 1 0 30 20 50 0 100 0 150 4
Elective- 4
Meaning of Cash, Motives for holding cash, objectives of cash management, factors
determining cash needs, Cash Management Models, Cash Budget, Cash
Management: basic strategies, techniques and processes, Lock Box system and
concentration banking, compensating balances ; Marketable Securities: Concept,
types, reasons for holding marketable securities, alternative strategies, choice of
securities; Cash Management Practices in India.
Need and objectives of financing of working capital, short term credit, mechanism
and cost-benefit analysis of alternative strategies for financing working capital :
accrued wages and taxes, accounts payable, trade credit, bank loans, overdrafts, bill
discounting, commercial papers, certificates of deposit, factoring, secured term loans,
etc; Pattern and sources of Working Capital Financing in India with reference to
Government policies, working capital control and banking policy- prominent
committees on working capital financing.
Course outcome: At the end of course, the student will be able to:
CO 1 (Knowledge (K2)/Analyzing (K 4) )
CO 2 (Apply (K3)
Apply the techniques for managing cash and liquid assets of the firm.
CO 3 (Knowledge (K2)/Analyzing (K 4)
Plan and channelize the inventories in right quantity and at right time.
CO 4 (Applying (K 4)
CO 5 (Apply K3 / Analyzing (K 4)
Procure the funds for meeting the working capital needs of the firm.
2. Apply the techniques for managing cash and liquid assets of the
firm.
Cash
Cash Management
Opportunity Cost
Total Cost
Transaction Cost
Assumptions
C = Optimum Balance
A = Annual Cash Distribution
F = Fixed Cost Per Transaction
O = Opportunity Cost Of Holding
Overview
Description
Return
Z
Point
Sale of market
security
O
Lower Control Limit : Buy Security
1/3
Spread (Z)= (3/4 * Transaction cost *Variance of Cash Flow)
Interest Rate
Return Point = Lower limit + Spread (Z)
3
2 2
Variance of Cash Flow = (Standard Deviation) or ( )
• Miller-Orr Model talks about the UCL, LCL and return point for
better management of cash and determining its need.
• Stones’s model takes into account the Outer and Inner UCL &
LCL.
• https://youtu.be/w0yhtGfxMrQ.
• https://youtu.be/d_HRBwuYl0w
• https://youtu.be/e5xkJRmIoeo
• https://youtu.be/3LyL-KYclxQ
• https://youtu.be/e5xkJRmIoeo
• https://youtu.be/r36oh9RenJY
• https://youtu.be/dCoGsi-nivs
1. Concentration banking
• increases idle balances.
• moves excess funds from a concentration bank to regional banks.
• is less important during periods of rising interest rates.
• improves control over corporate cash.
Attempt all the parts: please pick the correct option from Glossary
Current Assets – Current Liabilities, Fixed, Is the amount of current assets
required to meet a firm's long-term minimum needs, Liquidity.
• Text books
• Rustagi R P, Working Capital Management, Taxmann
• Bhalla V.K - Working Capital management, Text and cases,
Anmol Publication, Delhi , 11th edition
• Reference Books
• Bhattacharya H, Working Capital Management, PHI, 3rd Ed.
• Rangrajan K, Misra A.; Working Capital Management, Excel
Books
• Sagner J, Working Capital Management: Applications and
Case Studies, Wiley Publication