Cash Management and Short Term Financing

Running head CASH MANAGEMENT AND SHORT-TERM financing Cash prudence and Short-term Financing University of Phoenix Cash Management and Short-term Financing Structured bullion wariness and efficient short- give financing atomic number 18 both beneficial and important for a phoner to remain competitive in the market this depart help maturation potential profit and sh arholder respect with the rising stock. Cash management is a tool for the company can use to manage hazardous funds ( property balances) that are non generating revenue giving the company the capability to use the freed silver to build sources for short-term financing through participation building securities.Cash management techniques include marketable securities, international cash in management, collection/disbursement vagabond, and Electronic Funds pitch. Short-term financing blow over the company the ability to secure cash needed for production alter the company to maximize profitability. Short-ter m financing methods include inventory financing, billsmaking(prenominal) paper, alternate reference book, bank loans, receivables financing, foreign borrowing.Cash management Techniques Float is the deflection between the recorded available cash and the amount that has been imputeed by the bank, this results in a succession delay when dealing with banking system and the transmit service and clearing break ups. A company will use the bumble to minimize collection times and accession disbursement dates to give them much time with the cash on hand to use in elicit building securities. Electronic Funds Transfer is quickly replacing the out-dated check system, with the EFT system the ease of electronically deposited funds this reduces the lag or gloomy time traditionally associated with the manual check.This system increases the efficiency of the banking system and decreases float times for the company. International cash management allows the company to deposit money in co untries with a soaring matter to rate returns. This allows the company to range in high return loans in a source of generating excess revenue. Marketable securities turn non-generating cash into interest generating revenue through CDS, treasury notes, treasury bills, savings deposits, Eurodollar deposits and commercial paper.The techniques used in cash management are used to reduce or eliminate unwished-for cash balances that do not generate revenue and turn them into interest earning securities. Collections control and management is vital in eliminating unwanted cash balances, the built-in purpose is for the company to retain the highest rate of cash solvency to maximize profitability. Companies find reduced the use of float methods with the increase of EFTs, time is not an know with the EFT, and this transition takes place adjacently.However, both float and Electronic Funds Transfer can be used in collections to maximize return. International cash management allows the co mpany to reach for the highest interest rate of return not found in the United States, the use of this technique is more contest the ability to manage funds through different geographical locations and time zones can be extensive. The International cash is always susceptible to bullion fluctuations, interest rate changes that could end in a lesser value than originally deposited.The International cash management runs at a high risk for the company exactly besides has the potential for the largest gain. Marketable securities are a good technique for cash management but run the risk of company loss with increasing interest rates. Trade credit occurs when a seller or manufacturer of goods extends credit to the company in the form of accounts payable. Bank loans can be used to provide the prerequisite cash to implement expansion or new product development. mercantile paper is a certificate issued to the investor, by the company this constitutes a debt that will be repaid.Foreign b orrowing lets a company seek extraneous the normal parameter to obtain loans at a lower rate. list and receivables financing let the company try to get based on their current asset value. Between all the financing options Trade credit constitutes approximately 40% of all short term credit to companies with trade credit a company can take advantage of discounts when the payments are made in a timely fashion, this give the company flexibleness in deciding on how long to carry their credit debt. some(prenominal) bank loans and trade credit are short-term provide immediate funds of financing.However, bank loans are at risk of requiring a high compensating balance, which lowers the amount of actual money lent to the company. Commercial paper methods of financing have the advantage of being issued below the prime interest rate that banks charge. Commercial paper does not have the challenge of compensating balance requirements but the paper can be lost, stolen, misplaced, or damaged. T he commercial paper knead has mostly been replaced by a computerized version. Foreign borrowing, like the other techniques, is overly short-term but runs the risk of foreign currency inflation or fluctuations.The use of receivables and inventory as collateral in financing is also short-term. Receivable has the advantage when the asset level inflates, as the value increase the amount of money increase that the company can borrow against. The uses of short-term financing or cash management both maintain the close of ensure sufficient funds the company will need to maximize profitability. Cash management utilizes control over the receipt and payment of cash as to minimize non-earning cash balances and to capitalize the freed up cash in interest earning modes.