Cash Management and Short-Term Investments Quiz

Cash management aims to maximize profits by efficiently managing cash flows.

Holding cash is not typically done for investment purposes but rather for transaction, precautionary, and speculative motives.

Cash depreciation is not a recognized component of cash management; instead, it refers to a reduction in the value of currency due to inflation or other economic factors.

Cash flow statements provide insights into a company's ability to generate cash and meet its financial obligations, aiding in assessing liquidity.

Cash management aims to ensure a company maintains sufficient liquidity to meet its obligations while optimizing cash flow for operational efficiency and profitability.

The Miller-Orr Model helps in establishing the optimal level of cash to be maintained to minimize transaction costs and maintain liquidity.

Money market funds offer investors a way to invest in short-term, low-risk securities, providing liquidity and modest returns.

Float refers to the time delay between when a payment is initiated and when funds are deducted from the payer's account, affecting the book and bank balances.

Dynamic pricing is not typically considered a cash management technique; it involves adjusting prices based on demand and supply.

While cash provides liquidity, holding excess cash can expose a company to liquidity risk by reducing returns and hindering investments.

T-bills are highly liquid and considered low-risk investments due to their short-term maturity and backing by the government.

Cash concentration systems consolidate funds from multiple accounts into a single central account, enhancing control and liquidity management.

Commercial paper is highly liquid, short-term debt issued by corporations, typically with maturities ranging from a few days to a year.

Short-term securities are susceptible to interest rate fluctuations, impacting their market value and the returns earned by investors.

Repos involve the sale of securities with an agreement to repurchase them at a specified price and date, providing short-term liquidity with a fixed maturity.