You are hired as a finance expert, to help Mr. Simpson his store’s cash management. Mr. Simpson is very eager to learn, so he has asked you to develop a set of questions to help him understand cash management. Answer the following questions:
a. What are some specific advantages for a company in holding adequate cash balances?
b. How can a company synchronize its cash flows, and what good would this effort do?
c. You have been going through the company’s checkbook and bank balances. In the process, you discovered that Company A, on average, writes checks in the amount of $10,000 each day and that it takes approximately five days for these checks to clear. Also, the Company receives checks in the amount of $10,000 daily, but loses four days while they are being deposited and cleared. What is the firm’s disbursement float, collections float, and net float?
d. How can a company speed up collections and slow down disbursement?
e. Why would a company hold marketable securities?
f. What factors should a company consider in building its marketable securities portfolio? What are some securities that should be held and some that should not be held?
You are hired as a finance expert, to help Mr. Simpson his store’s cash management. Mr. Simpson is very eager to learn, so he has asked you to develop a set of questions to help him understand cash management. Answer the following questions:
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