Cash Management - Financial Accounting

The video discusses cash management in business, focusing on two main strategies: planning cash receipts to meet payments and maintaining a minimum level of cash necessary for operations. The goal is to avoid debt and invest surplus cash to generate more income. Key principles include ensuring sufficient cash for obligations and investing excess cash wisely.

What is the primary goal of planning cash receipts in cash management?

• To increase the company's debt

• To ensure cash payments are met when due

• To reduce the company's cash flow

• To maximize cash reserves

Why is it important to keep only a minimum level of cash on hand?

• To avoid paying taxes

• To ensure cash is available for emergencies

• To invest excess cash for generating more income

• To increase the company's debt

What should be done with excess cash according to the cash management strategy?

• Invest it to make more money

• Distribute it among employees

• Keep it in a bank account

• Use it to pay off all debts

What is the interest rate typically earned on cash sitting in a bank account?

• Moderate

• Almost nothing

• Very high

• Varies significantly

What are the two key components of effective cash management?

• Maximizing investments and minimizing debts

• Planning cash receipts and maintaining high cash reserves

• Planning cash receipts and keeping minimum cash levels

• Increasing cash flow and reducing expenses