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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.
Period of operating cycle implies that total sum of number of days included in the various stages of operation commencing from the purchase of raw materials and ending along with c
How to solve a Time Series problem for a five year period
M/s ABC has an existing sales of Rs.50 lakhs and permits a credit period of 30 days to its customers. The firm cost of capital is 10% and the ratio of variable cost to sales is 85
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EOQ mathematical model As costs of ordering and holding stock are equal at the EOQ point, we can build a simple mathematical model to solve the problem, as follows: (Q/ 2) X
MATERIAL CONTROL It is said that "any fool can sell"—it is buying at the right price that is more critical to the achievement of a satisfactory return on capital employed. Buy
Determine the Functions of management accounting: 1. Planning and forecasting: management fixes various targets to be achieved by the business in near future. Planning and fo
A manufacturing company needs 2500 units of a particular component every year. The company buys it at the rate of Rs. 30 per unit. The order processing cost for this part
how do i use least squares method to solve semi average problem?
Activity Based Costing (ABC) differs from Absorption Costing (AC) in the manner in which overheads are charged to units. ABC charges overheads to units based on their proportion
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