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In the management of cash and marketable securities why should the primary concern be for safety and liquidity rather than maximizing of profit?
i think there is 3 reasons for the firm to get more safety and liquidity cash :
- transaction balances : the transaction motive involves the use of cash to pay for planned corporate expenses such as supplies, payrolls, and taxes.
-compensating balances for banks : for services provided rather than paying directly for those services.
- precautionary needs: assume management wants cash for emergency purposes when cash inflows are less than projected.
What else can I help you with?
What is the definition of a liquidity ratio?
Liquidity ratio are designed to test a company's ability to meet its short-term financial obligations. To find the ratio, you take Cash and Cash Equivalent + Marketable Securities + Accounts Receivable divided by Current Liabilities.
What are non-marketable securities?
Non-marketable securities are financial instruments that cannot be easily bought or sold on public exchanges due to a lack of liquidity. Examples include private equity investments, certain bonds, and shares in privately held companies. These securities typically have restrictions on transferability and may require a long-term commitment from investors. As a result, they often carry higher risks but can also offer potential for higher returns.
What is the purpose of a quick ratio?
Quick ratio is very important to assess the liquidity condition of company as compare to current liabilities, so that in case of emergency repayment or cash required how much money can be arrange by selling current assets like marketable securities or inventory etc.
What do you mean by securitization in NBFC?
Securitization in Non-Banking Financial Companies (NBFCs) refers to the process of converting illiquid assets, such as loans or receivables, into marketable securities. This involves pooling various financial assets and creating securities backed by these assets, which can then be sold to investors. By doing so, NBFCs can improve liquidity, manage risk, and obtain capital for further lending activities. It also allows investors to gain exposure to a diversified portfolio of loans.
What is the meaning of 'statutory liquidity ratio'?
It is the amount which a bank has to maintain in the form of cash, gold or approved securities. it is presently 25%.
WHAT IS unified global theory of management'- discuss the tendencies favouring?
1. In the management of cash and marketable securities why should the primary concern be for safety and liquidity rather than maximizing of profit? Justify your views.
How does cash and marketable securities differ?
Marketable securities are those securitues which can be marketed. eg- we can market the share of any company, debentures can also be marketed, and liquidity of these instruments become very high. while we can't market some instruments, like savings schemes of Post offices and also the liquidity of such instruments become so low. so, cash is different thing and it has nothing to do with marketable securities. because the concept of marketable security is different.Cash can be compare with marketable securities on the basis of its liquidity.
In managing cash and marketable securities what should the manager's primary concern?
Liquidity and Safety
What is the definition of a liquidity ratio?
Liquidity ratio are designed to test a company's ability to meet its short-term financial obligations. To find the ratio, you take Cash and Cash Equivalent + Marketable Securities + Accounts Receivable divided by Current Liabilities.
In the management of cash and marketable securities why should the primary concern be for safety AND liquidity rather than profit maximization?
the firm may hold excess funds in anticipation of cash outlay.when funds are being held for other than immediate transaction purposes, they should be converted from cash into interest-earning marketable securities which should be of highest investment grade usually consist of treasury bills, commercial paper, certification of time deposits from commercial banks realistically, management of cash and marketable securities cannot be separated. management of one implies management of other reasons for holding marketable securities there are several reasons for holding marketable securities such as 1. they serve as a substitute for cash balances many firms prefer to hold marketable securities as a substitute for transaction balances, precautionary balances, for speculative balances of for all three. in most cases the securities are held primarily for precautionary purposes or as a guard against a possible shortage of bank credit. 2. they held as a temporary investment where a return is earned while funds are temporarily idle. 3. they are built up to meet known financial requirements such as tax payments, maturing bond issue and so on. factors influencing the choice of marketable securities among the factors that will influence the choice of marketable securities 1. risk such as a. default risk. the risk that the issuer of the security can not pay the principal or interest at due dates. b. interest rate risk. the risk of declines in market values of the security due to rising interest rate c. inflation rate. the risk that inflation will reduce the real value of the investment. in periods of rising prices, inflation risk is lower on investments whose returns tend to rise with inflation than on investment whose return are fixed. 2. maturity MARKETABLE SECURITIES held should mature or can be sold at the same time cost is required. 3. yield or returns on securities. generally, the higher a security's risk the higher its required return. corporate investors, like other investors must make a trade-off between risk and return when choosing marketable securities. because these securities are generally held either for specific known need or for use in emergencies, the portfolio should consist of highly liquid short-term securities issued by the government or very strong corporations. treasurers should not sacrifice safety for higher rates of return. 4. Marketability (liquidity) risk this refers to the risk that securities cannot be sold at close to the quoted market price and is closely associated with liquidity risk.
What is the relationship between the yield and liquidity of securities?
kmkm
Why is the quick ratio a more refined liquidity measure than the current ratio?
Yes, quick ratio only incorporates those assets which immediately can be converted into cash like cash, marketable securities etc. and not included debtors or inventory
What is used to describe the ability of government securities to be traded quickly and easily?
Liquidity is used to describe how quickly securities can be traded.
What is the purpose of a quick ratio?
Quick ratio is very important to assess the liquidity condition of company as compare to current liabilities, so that in case of emergency repayment or cash required how much money can be arrange by selling current assets like marketable securities or inventory etc.
What is liquidity decision?
The decision made for the management of current asset that affects a firm's liquidity.
What is meant by liquidity management?
managing the amount
What is the meaning of liquidity ratio?
It is the amount which a bank has to maintain in the form of cash, gold or approved securities. it is presently 25%.
