Investment Strategy for Technology Company:
Cash is considered to be the most important asset for an organization. It is the engine which keeps the business moving. The company needs enough cash to maintain liquidity and at the same time earn returns on any excess cash which is lying dormant. The safe limit is to have enough cash on hand to cover at least two months overhead. This limit is in addition to any existing line of credit from the bank to take care of the working capital requirements. Cash Management is not easy as the cash inflow from the receipts do not match with cash outflow for disbursements. The firms in sectors like software and services do not have the same levels of spending like the capital intensive companies. Therefore, …show more content…
short-term, medium-term and long-term.
The following are some of the investment options for the company: Savings Deposits: This is one of the safest options available for the company. The returns are the lowest (around 4%) and the liquidity is very high. Most of the banks discourage companies from opening savings deposit. Also, the savings deposit has some restriction on the number of transactions and the company should take care not to use this account for day-to-day transactions which can be taken care by the current account. This facility should be used only for parking funds which the company does not need in the very short run (15 – 30 days). Term Deposits: The term deposits have moderate return of 5% – 9% depending on the bank and the duration. The maturity period ranges from 14 days to 10 years. The company can use this facility for parking funds for short and medium terms. Although the liquidity is high and default risk is very low, banks levy penalty for premature withdrawal and hence it is prudent to use this option only for amount which the company does not need before the maturity …show more content…
The money market is used mainly by companies to take care of their liquidity as well as earn return on excess cash. The return on most of these instruments fluctuates on a daily basis depending on macroeconomic factors, RBI policy etc. The company can also open money market account in banks which is similar to savings account. It is a low risk account where the money parked by the investor is used by the bank for investing in money market instruments and interest is earned by the account holder for allowing bank to make such investment. The interest is compounded daily and paid
Cash is considered to be the most important asset for an organization. It is the engine which keeps the business moving. The company needs enough cash to maintain liquidity and at the same time earn returns on any excess cash which is lying dormant. The safe limit is to have enough cash on hand to cover at least two months overhead. This limit is in addition to any existing line of credit from the bank to take care of the working capital requirements. Cash Management is not easy as the cash inflow from the receipts do not match with cash outflow for disbursements. The firms in sectors like software and services do not have the same levels of spending like the capital intensive companies. Therefore, …show more content…
short-term, medium-term and long-term.
The following are some of the investment options for the company: Savings Deposits: This is one of the safest options available for the company. The returns are the lowest (around 4%) and the liquidity is very high. Most of the banks discourage companies from opening savings deposit. Also, the savings deposit has some restriction on the number of transactions and the company should take care not to use this account for day-to-day transactions which can be taken care by the current account. This facility should be used only for parking funds which the company does not need in the very short run (15 – 30 days). Term Deposits: The term deposits have moderate return of 5% – 9% depending on the bank and the duration. The maturity period ranges from 14 days to 10 years. The company can use this facility for parking funds for short and medium terms. Although the liquidity is high and default risk is very low, banks levy penalty for premature withdrawal and hence it is prudent to use this option only for amount which the company does not need before the maturity …show more content…
The money market is used mainly by companies to take care of their liquidity as well as earn return on excess cash. The return on most of these instruments fluctuates on a daily basis depending on macroeconomic factors, RBI policy etc. The company can also open money market account in banks which is similar to savings account. It is a low risk account where the money parked by the investor is used by the bank for investing in money market instruments and interest is earned by the account holder for allowing bank to make such investment. The interest is compounded daily and paid