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Rupesh Roshan Singh, Lovely Professional University Unit 11: Management of Cash

Unit 11: Management of Cash Notes

CONTENTS
Objectives
Introduction

11.1 Cash Management
11.2 Cash Management Planning Aspects
11.3 Cash Management Control Aspects

11.4 Cash Collection and Disbursement Systems
11.4.1 Concept of Float
11.4.2 Managing Float
11.5 Cash Management Models
11.5.1 William J. Baumol's Economic Order Quantity Model

11.5.2 Miller-Orr Cash Management Model
11.6 Treasury Management
11.7 The Cash Conversion Cycle

11.8 Management of Marketable Securities
11.9 Summary
11.10 Keywords
11.11 Review Questions
11.12 Further Readings

Objectives

After studying this unit, you will be able to:

 Describe the management of cash;
 Discuss the cash management planning and control aspects;
 Explain the different cash management models;
 Recognize the cash conversion cycle.

Introduction

Management of cash is an important function of the finance manager. The modern day business
comprises of numerous units spread over vast geographical areas. It is the duty of the finance
manager to provide adequate cash to each of the units. For the survival of the business, it is
absolutely essential that there should be adequate cash. It is the duty of finance manager to
maintain liquidity at all parts of the organization while managing cash. On the other hand, he
has also to ensure that there are no funds blocked in idle cash. Idle cash resources entail a great
deal of cost in terms of interest charges and in terms of opportunities costs. Hence, the question

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