Fin 311 - Chapter 20 - Cash And Liquidity Mangement, Part 7

Front 1

Speculative motive

Back 1

The need to hold cash to take advantage of additional investment opportunities, such as bargain purchases.

Front 2

Precautionary motive

Back 2

The need to hold cash s a safety margin to act as a financial reserve.

Front 3

Transaction motive

Back 3

The need to hold cash to satisfy normal disbursement and collection activities associated with a firm's ongoing operations.

Front 4

Float

Back 4

The difference between book cash and bank cash, representing the net effect of checks in the process of clearing.

Front 5

Lockboxes

Back 5

Special post office boxes set up to intercept and speed up accounts receivable payments.

Front 6

Cash concentration

Back 6

The practice of and procedure for moving cash from multiple banks into the firm's main accounts.

Front 7

Zero-balance account

Back 7

A disbursement account in which the firm maintains a zero balance, tranferring funds in from a master account only as needed to cover checks presented for payment.

Front 8

Controlled disbursement account

Back 8

A disbursement account to which the firm transfers an amount that is sufficient to cover demands for payment.

Front 9

Target cash balance

Back 9

A firm's desired cash level as determined by the trade-off between carrying costs and shortage costs.

Front 10

Adjustment costs

Back 10

The costs associated with holding too little cash. Also, shortage costs.