From the course: Finance Foundations
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Cash management
- Let's talk about cash management. First, why should a company have any cash at all? As we know, cash is a low yielding asset. The return on the cash I have in my bank account is less than 1%. So a company doesn't want to have too much low yielding cash, but a company also wants to have enough cash to handle routine needs. Bills have to be paid in cash, employees have to be paid in cash, rent has to be paid in cash, insurance has to be paid in cash. A company has to manage cash to ensure that the cash is there when it's needed. If payroll is due to be paid on Friday and you don't have the cash, your entire operation will be thrown into chaos. In short, companies need to carefully manage their cash. As an example of the need for cash management, here is a graph showing the fluctuations in the quarterly cash balance of Toys R Us, the toy retailer. The US operations for Toys R Us closed in 2018, but the company still operates over 800 stores outside the United States. In this cash…
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