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One of the main deities of the financial manager is to keep a sound liquidity position for the firm hence the dues are settled as and while they mature. Separately from this the finance manager has to make sure that enough cash is obtainable for the smooth running of operating activities and also for paying of dividends, taxes and interest. Under a nut shell there must be availability of cash to convene the firm's obligation and while they turn into due. The real dilemma that the finance manager faces is to chose on the quantum of cash balance to be not kept in such a manner that at any specified point of time there is neither cash deficit nor cash surplus. Cash is a non-earning asset; thus, cash must be kept at the minimum level. The cost of holding cash is the loss of interest or return had which cash been invested beneficially. The surplus cash cost is the cost of interest or opportunities foregone. The cost of shortage or deficit of cash is measured through the cost of raising funds to meet the deficit or in extreme cases the cost of restructuring, bankruptcy and loss of goodwill.
Cash shortage can results in sub-optimal investment and sub-optimal financing decisions.
The firm must keep optimum just sufficient neither more nor too little cash balance. There are several models used to compute the optimum cash balance such a firm ought to keep. However the most broadly termed as model is Baumol's model. This is chiefly used while cash flows are predictable.
CVP ANALYSIS AND COMPUTER APPLICATIONS The output from a CVP model is only as good as the input. The analysis will include assumptions about sales mix, production efficiency, p
Q. What is Pricing under decline stage? Pricing under decline stage: under this stage sales are at their highest point. He should reduce the price if necessary taking the compe
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King Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows: Maintenance
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Pricing is a problem in four general types of situations: 1) When the firm develops or introduces a new product and it is fix the price of the product for the first time. 2)
Private sector companies have multiple stakeholders who are likely to have divergent interests.( five stakeholder groups and discuss their financial and other objectives).
underlying assumptions of breakeven analysis and the limitations of this.
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