Cash Mgt

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cash management by jim

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Cash Mgt

  1. 1. CASH MANAGEMENT MODELS
  2. 2. 2 MODELS <ul><li>Baumol Model </li></ul><ul><li>Miller Orr Model </li></ul>
  3. 3. BAUMOL MODEL <ul><li>Developed by WILLIAM J BAUMOL. </li></ul><ul><li>Carrying cost </li></ul><ul><li>Transaction cost </li></ul>
  4. 4. <ul><li>Formula for calculating Optimum Cash Balance: </li></ul><ul><li>C=√2up/s </li></ul><ul><li>C - Optimum Cash Balance </li></ul><ul><li>u - Annual/ monthly cash requirement </li></ul><ul><li>p - Fixed cost per transaction </li></ul><ul><li>s - Carrying cost </li></ul>
  5. 5. <ul><li>Monthly cash requirement = Rs 60000 </li></ul><ul><li>Fixed cost = Rs 10 </li></ul><ul><li>Interest = 6% p.a. </li></ul><ul><li>Find the Optimum Cash Balance. </li></ul>

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