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Cash Management for Companies

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Companies today attempt to maximize their cash on hand by paying bills at the latest possible time while trying to collect their accounts receivable as soon as possible. This practice has become more and more pronounced in recent years. What are some reasons that companies today practice such tight cash management? What are some factors that have contributed to this?

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Solution Summary

Reasons why companies today practice such tight cash management are given. Some factors that have contributed to this are discussed.

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A firm should hold an optimum balance of cash, and invest any temporary excess amount in short-term (marketable) securities. The following are the reasons for holding cash:
? Transaction Motive for Holding Cash
A firm needs cash to make payments for acquisition of resources and services ...

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