What Is The Difference Between Cash And Cash Outflows?

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Recommended: Cash management research literature

This chapter presents the literature and studies engaged from the several sources like books, internet links and other sources after the in-depth search done by the researchers. This chapter will also comprise the synthesis in order to fully know and comprehend the research.

Cash Holdings

The act of holding cash is directly affiliated to investment decisions of firms, which, successively, depend on financial flexibility. Firms could likewise use the cash in physical or other kind of financial investments or even allocate it to existing shareholders. Cash holdings get especially of great significance in the event of a negative shock to cash flows or an investment opportunity. A firm will be conservative and keep more cash to cause to seem …show more content…

The cash and cash equivalents item is considered the most liquid asset type on the balance sheet of any particular company. Companies have a requirement to hold cash and cash equivalents in a state of proper readiness to direct their day-to-day operations. The difference among cash inflows and cash outflows is the cash and cash equivalent item of the balance sheet. Appropriate to many reasons, cash outflows may be greater in scope than cash inflows and vice versa. Excessive inflows may lead to an inordinate cash position, while excessive outflows could bring forth shortage of liquidity, while excessive inflows could lead to an excessive cash position. Cash shortage can be an important serious problem, since it will generate difficulty in following short-term obligations. On the other hand, surplus of cash is less noticeable as a problem, except that there are several various reasons a company should not hold on to excessive. But then, by holding a large quantity of cash available it can create several positive effects, such as the capability to further react to investment opportunities and the resources to keep up financial position by using the cash as a safeguard. (Mihai and Radu, …show more content…

He recommended that they hold cash for transactions, as a precaution and for speculative purposes. According to (Baum, Caglayan, Ozkan, & Talavera, 2004), companies need to balance short-term cash inflows and outflows following that these are not perfectly coordinated and this is a transactions process for holding cash. The companies hold an essential part of their resources in the form of cash, keeping in mind the end goal to meet its transaction needs that would emerge over the span of operating activity and regular business activities. The size of the cash reserve can be evaluated by preparing so as to estimate cash inflows and outflows and by preparing cash

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