Management of Cash involves three things

Ø Transaction Motive for Holding Cash A firm needs cash to make payments
for acquisition of resources and services for the normal conduct of business.
Ø Precautionary Motive for Holding Cash A firm keeps additional funds to
meet any emergency situation.
Ø Speculative Motive for Holding Cash Some firms may also maintain cash
for taking advantages of speculative changes in prices of input and output.
Ø Optimum Balance of Cash A firm should hold an optimum balance of cash,
and invest any temporary excess amount in short-term (marketable) securities.
In choosing these securities, the firm must keep in mind safety, maturity and
marketability of its investment.
Ø Management of Cash involves three things: (a) managing cash flows into and
out of the firm, (b) managing cash flows within the firm, and (c) financing deficit
or investing surplus cash and thus, controlling cash balance at a point of time. It
is an important function in practice because it is difficult to predict cash flows
and there is hardly any synchronisation between inflows and outflows.
Ø Cash Budget Firms prepare cash budget to plan for and control cash flows.
Cash budget is generally prepared for short periods such as weekly, monthly,