Management and Organizational Studies 2310A/B Study Guide - Midterm Guide: Weighted Arithmetic Mean, Electronic Data Interchange, The Surplus

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Jun Wang

Document Summary

Target cash balance: a firm"s desired cash level as determined by the trade-off between carrying costs and shortage costs. Adjustment costs: the costs associated with holding too little cash. Greater the interest rate, the lower is the target cash balance. Greater the trading cost, the higher is the target balance. Borrowing is likely to be more expensive than selling marketable securities because the interest rate is likely to be higher. The need to borrow depends on management"s desire to hold low cash balances. A firm is more likely to have to borrow to cover an unexpected cash outflow the greater its cash flow variability and the lower its investment in marketable securities. Float: difference between book cash and bank cash, representing the net effect of cheques in the process of clearing: float = available balance - firm"s book balance, disbursement float (payment) and payment float (disbursement)