Cash Management Case Study

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2.4.1. Cash Management Cash is the most liquid asset that is essentially used to guarantee or at least secure a firm’s solvency and financial stability. It is the fundamental input that maintains the operations of any business and it is also the optimal output any company anticipates by sales of the products it offers. (Abioro, 2013) According to Bagayao and Manalo (2016), cash management is the employment of a system by a firm for both its cash inflows and cash outflows. It is used for short-term and some other long-term investments. It involves not only the ability to pay obligations, but also reducing the time of collecting receivables, thus expanding collection rates, and improving profitability. The importance of cash management is to provide favourable net cash flow for productive business operations. Ensuring that a company has sufficient cash on hand to meet its expenses and investing any surplus is its most basic use. It also entails necessary actions and measures to improve or at least sustain proper levels of cash to meet the day-to-day needs of a company. Therefore,…show more content…
Bagayo (2016), further expounded on the accounts receivable management as one of the key considerations in managing working capital. According to him, sales revenue may be classified as cash sales revenue or credit sales revenue. Credit sales are intended to cater to the demand of a consumer who is unwilling or unable to pay on a cash basis as of the date of sale. A more lenient term of sale which offers a cash discount for prompt payment, to entice more consumers to avail a product or service and pay for it on a later date. This will cause an increase in the net income through additional revenue but does not come with a cash inflow as of the reporting date. Consequently, the average age of receivable will be reduced due to two
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