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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.
What are the Advantages or uses of break even charts Computation of break even point or presentation of cost volume and profit relationship by way of break even charts has the
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From the subsequent financial data describe: a) How the airline company has grown-up b) How the company has been capable to earn grater margins at higher levels of sales
The Pinewood Furniture Company Pty Ltd plans to design two lines of chairs in the coming year-lounge and patio. The company is considering introducing an activity-based costing sys
5 application areas of linear programing in management accounting
REGRESSION ANALYSIS A regression equation identifies an estimated relationship between a dependent variable (the cost) and one or more independent variables (the cost driver).
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