Cash Management, the Key to Business Survival
One of the miserable things in life is to have no money in your pocket. You cannot go to your favorite restaurant, go to the mall, wear the best clothes, and go for sightseeing when the pocket is empty. This is true for businesses alike. Without cash, a firm would struggle to survive in business. Cashflow is the lifeline of a business. Cash is used by individuals and companies to settle debt obligations and operating expenses. For example, a business needs cash to pay taxes, pay employee salaries, purchase inventory, pay for rent etc. Having seen the importance of cash to a business, it is necessary for firms to manage it properly. Cash is held for transactional, precautionary and speculative reasons. Transactional reasons refer to holding cash to meet payments in the ordinary course of business. Precautionary reasons refer to holding cash to meet unforeseen cash needs. Speculative reasons refer holding cash to take advantage of opportunities as a...