Cash Management Techniques And Methods Of Short-Term Financing

Working capital is a significant part of the cash flow analysis, it consists of the current assets less the current liabilities and can help assess the liquidity of the business for the upcoming accou... ... middle of paper ... ...the flexibility of the company to cope with emergencies. So as the statement of cash flows generate free cash flow, it can be said that it may be more useful for investors however, both reports should be used for a more reliable decision to be made (Fight, A, 2005). REFERENCES • Daniel, N, Denis, D & Naveen, L . (2010) Sources of Financial Flexibility: Evidence from Cash Flow Shortfalls*. [Online] p.2-20.

The increase predictable the inflows and outflows of cash for a firm, the low cash that needs to be held for precautionary needs. It is important to point out that not all of the firm’s needs for cash call for holding cash equal exclusively. The second and third item in the preceding lists collectively represent collection float, the total time between the mailing ... ... middle of paper ... ...ng consideration. Outsourcing – shifting an ordinarily “in-house” operation to an outside company – is not new idea when its comes to cash management.The increase in interest rates available on marketable securities, of course the greater will be the opportunity cost to maintaining idle cash balances. The optimal level of cash would be the larger (1) the transactions balances required when cash management are efficient,or (2) the compensating balances requirements of the commercial banks with which the firm have deposit accounts.

Typically, vacationers wanting to exchange money will not be bothered with shifts in the exchange rates. However, for multinational companies, dealing with very large amounts of money in their transactions, the rise or fall of a currency can mean receiving a surplus or a deficit on their balance sheets, which is an example of translation risk. Translation risk is more of an accounting issue, and refers primarily to the impact of exchange rates on earnings and balance sheet items (Hedging, 1999). Another type of exchange risk faced by multinational companies is transaction risk. If a company sells products to an overseas customer, it might be subject to transaction risk.

Strong companies as such can ensure the company to generate more cash and a good return for investments. (Whatley, n.d.). Companies with high fixed assets such as plant, property and equipment can act as loan collateral. Such companies have the alternative to sell surplus assets to pay for the debts acquired. The second step of a leveraged buyout is to... ... middle of paper ... ...anagers to reduce their firm’s risk.

Capital markets promote economic efficiency by moving funds from those who do not have an immediate need for it to those who do. Individuals or companies will put money at risk if the return on the intended investment is greater than the return of holding risk-free assets. An example of this would be those that invest in real estate or purchase stocks and bonds. Those that invest want the stock, bond, or real estate to grow in value or appreciate. An example of this concept would be if an individual or company invested an amount saved over the course of a year.

Diversification is not a promise against loss; however it is a significant financial concept for attaining long-range financial objectives while keeping risks low. A company that takes great risks to receive a higher payout places the firm in jeopardy. A company that loses a considerable amount of money in the financial market decreases the chance of cash flows; the value of the company falls thus causing a ripple effect. On the flip side, taking the risk for a higher return will produce additional money for reinvestment. The advantage of "unrelated diversification" is heightened performance in cash management and distribution of investment capital.

Additionally, intermediaries can provide risk transformation, which offer the ability to convert risky investments into relatively risk-free by lending to multiple borrowers to spread the risk. By pooling the funds of multiple investors, the intermediary – such as a mutual fund – inherently provides diversification and tolerance against a single investment producing undesirable results. Finally, convenience denomination is provided by an intermediary. With a large quantity of deposits being held at a financial intermediary, they are able to match small deposits with large loans, and larger deposit... ... middle of paper ... ... the economy as a whole; it keeps the cycle of money flowing, investing in companies to fuel growth. When an intermediary grows as large as Berkshire ($113 billion market cap), caution must be placed on where the money is flowing.

This involves the changes of long-term liability and stockholders equity. It gives an investor a good overview of the balance sheet. If a company has a positive number in cash flows from financial statement it means that cash is flowing more into the company that flowing out, which increases the company 's assets. If the company has a negative number, it means the there’s debt within the company or they 're just making dividend payments. Having a negative number in cash flow does not mean that the company is not profitable.

Results also indicate that increment in domestic interest rate will dampen our exchange rate and increase in money supply, on the other hand, strength the RM. This finding shows that monetary policy is a useful tool in controlling the movement of Malaysian Ringgit. While increase in the interest rate could cause further capital inflows tha... ... middle of paper ... ...ry. The three main factors are the use of gold and silver as a currency, to avoid currency devaluation, and to limit printing of loose money (fulus). In addition, manipulation of currencies and the impact toward one economy could be reduced because of the fact that gold does not inflate in value as it is a commodity and, thus, has an intrinsic value.

This system is more effective when the company seeks to track the cash available during a sp... ... middle of paper ... ...tate. Moreover I defined the difference of using this particular financial tracker in long as well as in short cycle; where in the case of a short-run process it will be affected by fewer timing and matching problems, even though Finger (1994) affirmed that from a predictable point of view, cash flows in a short-run is more efficient. However the Accrual accounting is expected to reduce easily earnings problems when the firm or the company is exposed to new investments, when it experience or undertake financial activities and large changes as well. But, Dechow, Kothari, and Watts (1998), explain that cash flow – in the case of a regression – will have an incremental explanatory power. As a result of the analysis it is notable that Accrual and Cash Flows accounting have different results that reflect the different environment that those systems are used.