Asked by Anthony Flesher on Jun 14, 2024
Verified
Which of the following best describes one of the goals of cash management,given that it is referred to as a "non-earning" asset?
A) One goal of cash management is to maximize the amount of cash necessary to conduct business.
B) One goal of cash management is to minimize the amount of cash necessary to conduct business.
C) One goal of cash management is to optimize the amount of cash needed to payout dividends.
D) One goal of cash management is to minimize the amount of cash necessary to pay interest expense.
Non-earning Asset
A non-earning asset is an asset that does not produce income or interest for its owner.
Conduct Business
The manner in which a company operates within its chosen marketplace, including its strategies, practices, and procedures.
Cash Management
The strategy of collecting, managing, and investing cash in a way that maximizes the availability of cash and minimizes the cost of using external funds.
- Determine the motives behind organizations keeping cash reserves and the objectives for holding marketable securities.
Verified Answer
SS
Sammy SabaleskyJun 19, 2024
Final Answer :
B
Explanation :
Since cash is considered a "non-earning" asset, the goal of cash management is typically to minimize the amount of cash necessary to conduct business while still ensuring that there is enough available to meet short-term obligations. This can be achieved through effective cash forecasting, budgeting, and utilization of financial tools such as cash sweeps and lockboxes. Maximizing the amount of cash on hand is generally not a desirable goal as it ties up resources that could be used for other investments or operations. Optimizing cash for dividends or interest expenses may be relevant in specific situations, but it is not a general goal of cash management.
Learning Objectives
- Determine the motives behind organizations keeping cash reserves and the objectives for holding marketable securities.