Page 411 - F1 Integrated Workbook STUDENT 2018

Working capital management – receivables, payables, inventory
and cash

Cash control

4.1 Overview

Once again the company faces a balancing act:

Liquidity – ability to
pay bills as they fall
due and take
advantage of
opportunites
immediately.

Profitability –
minimising the
holding of cash – an
idle asset – better
invested.

There are three areas associated with managing cash:

 The cash budget and cash flow forecast

 The Miller-Orr model

 The Baumol model

Calculations on the miller-orr model and the baumol model will not be required in the
exam.

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