Explore BrainMass

Explore BrainMass

    Corporate Finance - Excess Cash Management

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    17.2 What options are available to a firm if it believes it has too much cash? How about too little?

    17.8 For each of the short-term marketable securities given here, provide an example of the potential disadvantages the investment has for meeting a corporation's cash management goals.

    a. U.S. Treasury bills
    b. Ordinary preferred stock
    c. Negotiable certificates of deposit (NCDs)
    d. Commercial paper

    17.11 Another option usually available for dealing with excess cash is to reduce the firm's outstanding debt. What are the advantages and disadvantages of this use of excess cash?

    © BrainMass Inc. brainmass.com June 3, 2020, 8:07 pm ad1c9bdddf
    https://brainmass.com/business/cash-management/corporate-finance-excess-cash-management-124759

    Solution Preview

    17.2 What options are available to a firm if it believes it has too much cash? How about too little?

    If the firm believes it has too much cash it has the following options
    1. Reduce borrowing by paying off short term loans.
    2. Invest the excess cash in marketable securities
    3. Pay off the suppliers early if there is a possibility of taking cash discounts
    4. Give higher dividends or buy back stock
    If the firm has too little, then it needs to conserve cash and its options are
    1. Set up lines of credit to take care of cash requirements
    2. Collect its ...

    Solution Summary

    The solution explains how to manage excess cash and the instruments that are available for short term investment.

    $2.19

    ADVERTISEMENT