Management and Organizational Studies 2310A/B Chapter Notes - Chapter 19: Electronic Data Interchange, E-Commerce Payment System, Opportunity Cost

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

Document Summary

Cash management: objective - to keep the investment in cash as low as possible while still keeping the firm operating efficiently and effectively, collect early pay late, related to optimizing mechanisms for collecting and disbursing cash. Firms must invest temporarily idle cash in st ms. Costs of holding cash: opportunity cost - interest income in ms, low if the firm holds little cash, cash balance must be maintained to provide liquidity, cash. To determine target cb weight the benefits against costs of holding cash: holding of cash and ms (near-cash equivalents) Trading costs are high when the size of cash is low. Liquidity management: the optional quantity of liquid assets a firm should have on hand. The greater the ir the lower the target cb. The greater the trading cost, the higher the target cb. Should be higher for firms facing greater uncertainty in forecasting. Adjustment costs: the costs associated with holding too little cash: also called shortage costs.