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Value-Based Cash Management Models Application in Firm

RYNEK FINANSOWY, SZANSE I ZAGROZENIA ROZWOJU, Zarzadzanie finansami przedsiebiorstw i instytucji, UMCS Lublin, 2005

17 Pages Posted: 19 Jul 2007 Last revised: 17 Dec 2013

Grzegorz Michalski

Uniwersytet Ekonomiczny we Wrocławiu - Faculty of Engineering and Economics

Date Written: 2005 12, 12

Abstract

Firms hold cash for a variety of different reasons. Generally, cash balances held in a firm can be called considered, precautionary, speculative, transactional and intentional. The first are the result of management anxieties. Managers fear the negative part of the risk and hold cash to hedge against it. Second, cash balances are held to use chances that are created by the positive part of the risk equation. Next, cash balances are the result of the operating needs of the firm. In this article, we analyze the relation between these types of cash balances and risk. This article also contains propositions for marking levels of precautionary cash balances and speculative cash balances. Current models for determining cash management, assign no minimal cash level, or their minimal cash level is based on the manager's intuition. Presented in this article model avoid intuition and is based on calculation. Application of this proposition should help managers to make better decisions to maximize the value of a firm.

Keywords: Cash management models, Demand for cash, Cash balances, Risk, Uncertainty, Real Options, Option Value of Money, Short-Term Financial Management, Working Capital Management

JEL Classification: G39, G32, G11, M11, D81, O16, P33, P34

Suggested Citation

Michalski, Grzegorz, Value-Based Cash Management Models Application in Firm (2005 12, 12). RYNEK FINANSOWY, SZANSE I ZAGROZENIA ROZWOJU, Zarzadzanie finansami przedsiebiorstw i instytucji, UMCS Lublin, 2005. Available at SSRN: https://ssrn.com/abstract=1000762 or http://dx.doi.org/10.2139/ssrn.1000762

Grzegorz Michalski (Contact Author)

Uniwersytet Ekonomiczny we Wrocławiu - Faculty of Engineering and Economics ( email )

ul. Komandorska 118-120
Wroclaw, 53-345
Poland

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