CASH MANAGEMENT BY-
CASH MANAGEMENT • Cash management is concerned with the managing of: • cash flows into and out of the firm, • cash flows within the firm, and • cash balances held by the firm at a point of time by financing deficit or investing surplus cash
Four Facets of Cash Management • Cash planning • Managing the cash flows • Optimum cash level • Investing surplus cash
Managing Cash Collections and Disbursements • Accelerating Cash Collections • Decentralised Collections • Lock-box System
Case of Simpson’s Scuba Inc. • Current no coordinated cash management system • Cash-acceleration plan proposed that involves both a lock-box system and concentration bank.
COST ANALYSIS • OPPORTUNITY COST • FUNDS FREED*RATE OF INTEREST =$504000 • SAVING IN EXPENSES =$48000 TOTAL $552000 • COST OFPROPOSED NEW SYSTEM • CHEQUE PROCESSING COSTS $29700 • COST OF ATDC $7560
RECOMMENDATION • Its annual gain is (Opportunity cost - cost of new system) =$514740 • ACCEPT THE NEW SYSTEM
THANKS ANY QUERIES!