COMMERCE 3FA3 Chapter : 3FA3-19.docx
11 Apr 2012
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Speculative motive: the need to hold cash to take advantage of additional investment opportunities, such as bargain purchases. Precautionary motive: the need to hold cash as a safety margin to act as a financial reserve. Transaction motive: the need to hold cash to satisfy normal disbursement and collection activities associated with a firm"s ongoing operations. 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. Float: the difference between book cash and bank cash, representing the net effect of cheques in the process of clearing. Smart card: much like an automated teller machine card, one use is within corporations to control access to information by employees. Lockboxes: special post office boxes set up to intercept and speed up accounts receivable payments. Debit card: an automated teller machine card used at the point of purchase to avoid the use of cash.
