Free Essays on Working Cash Management

Working capital is very important for all departments in a company. â€Å"Accounting is frequently responsible for payable and receivable; operations is in charge of inventory; and finance handles cash management. Marketing also plays a key role because sales forecasts are a key determinant of working capital needs† (Jordan,2001,p.477). Working capital basically deals with a firm’s short-term assets and liabilities. â€Å"It refers to the amount of capital which is readily available to an organization. That is, working capital is the difference between resources in cash or readily convertible into cash (current assets) and organizational commitments for which cash will soon be required (current liabilities)† (Treasury, 2002). If a company operates with more working capital than necessary, there are problems within operations. The objective is to maintain a balance within the entities of working capital management. The overstatement of working capital could be used for investment purposes instead of accumulating in bank deposits. The balancing of working capital management occurs with the understanding of float management, inventory management, and cash management. Float is basically the difference in a company’s book balance and available balance. It represents that time period of clearing a check. The balance on the check register (book balance) is automatically deducted when a check is written, while the financial institution (available balance) remains constant until the check has cleared the account. â€Å"properly managing float can significantly impact a bank’s funding requirements and over profitability† (Glassman, 2002). Disbursement and collection float are the two types of floats. Disbursement float occurs as checks are written by a company, causing a decrease in the book balance and no change in the available balance. On the other hand, checks received by a company generates collection... Free Essays on Working Cash Management Free Essays on Working Cash Management Working capital is very important for all departments in a company. â€Å"Accounting is frequently responsible for payable and receivable; operations is in charge of inventory; and finance handles cash management. Marketing also plays a key role because sales forecasts are a key determinant of working capital needs† (Jordan,2001,p.477). Working capital basically deals with a firm’s short-term assets and liabilities. â€Å"It refers to the amount of capital which is readily available to an organization. That is, working capital is the difference between resources in cash or readily convertible into cash (current assets) and organizational commitments for which cash will soon be required (current liabilities)† (Treasury, 2002). If a company operates with more working capital than necessary, there are problems within operations. The objective is to maintain a balance within the entities of working capital management. The overstatement of working capital could be used for investment purposes instead of accumulating in bank deposits. The balancing of working capital management occurs with the understanding of float management, inventory management, and cash management. Float is basically the difference in a company’s book balance and available balance. It represents that time period of clearing a check. The balance on the check register (book balance) is automatically deducted when a check is written, while the financial institution (available balance) remains constant until the check has cleared the account. â€Å"properly managing float can significantly impact a bank’s funding requirements and over profitability† (Glassman, 2002). Disbursement and collection float are the two types of floats. Disbursement float occurs as checks are written by a company, causing a decrease in the book balance and no change in the available balance. On the other hand, checks received by a company generates collection...