tailieunhanh - Brealey−Meyers: Principles of Corporate Finance, 7th Edition - Chapter 31

CHAPTER THIRTY-ONE CASH MANAGEMENT Chapter 30 provided an overall idea of what is involved in short-term financial management. Now it is time to get down to detail. We begin in this chapter by looking at how companies manage their holdings of cash and marketable securities. | Brealey-Meyers Principles of Corporate Finance Seventh Edition The McGraw-Hill Companies 2003 IX. Financial Planning and I 31. Cash Management Short-Term Management CHAPTER THIRTY-ONE CA H MANAGEMEN 880 IX. Financial Planning and I 31. Cash Management Short-Term Management Brealey-Meyers Principles of Corporate Finance Seventh Edition The McGraw-Hill Companies 2003 CHAPTER 30 PROVIDED an overall idea of what is involved in short-term financial management. Now it is time to get down to detail. We begin in this chapter by looking at how companies manage their holdings of cash and marketable securities. Then in the next chapter we look at the terms on which firms sell their goods and how they ensure that their customers pay promptly. Out first task is to explain how cash is collected and paid out. In the United States small routine payments are commonly made by check. You want to ensure that when customers pay by check you can convert these payments into usable cash in the bank quickly and cheaply. The use of checks is on the decline and large payments are almost always made electronically. You therefore need to understand how electronic payment systems work. Our second task is to consider how much cash the firm should hold. Companies have a choice between holding cash in the bank and investing it in short-term securities. There is a trade-off here. Cash gives you a store of liquidity which can be used to pay employees and suppliers. However cash has the disadvantage that it does not pay interest. As we explain in the second section of this chapter the trick is to strike a sensible balance. In the last chapter we explained how companies raise short-term loans to tide them over a temporary cash shortage. If you are in the opposite position and have surplus cash you need to know where you can park it to earn interest. So in the final section of this chapter we look at the menu of short-term investments that are available to the financial manager. CASH COLLECTION .