Cash

Cash

Reasons for keeping cash

• Cash is usually referred to as the "king" in finance, as it is the most liquid asset.
• The transaction motive refers to the money kept available to pay expenses.
• The precautionary motive refers to the money kept aside for unforeseen expenses.
• The speculative motive refers to the money kept aside to take advantage of suddenly arising opportunities.

Advantages of sufficient cash

• Current liabilities may be catered for.
• Cash discounts are given for cash payments.
• Production is kept moving.
• Surplus cash may be invested on a short-term basis.
• The business is able to pay its accounts timeously, allowing for easily-obtained credit.
• Liquidity