What is a cash position?

Cash laying concerns the amount of the actual cash that the corporation, bank or other entity has at some point. Generally includes the actual cash or accounts that the company holds. It may also include other assets that are easily converted into cash, referred to as liquid assets such as short -term bonds or deposits certificates. It does not include assets that have low liquidity, such as products, real estate, machines or other items that cannot be transformed quickly and easily into cash.

While technically individuals can have a cash position equal to the amount of their liquid investment, this term is most often used in a business context. For example, the company states its cash position in its balance sheet and states that cash positions to investors, creditors or other stakeholders. The bank must also have a cash position.

In general, banks are obliged to have a specified minimum amount of cash based on the amount of the financialthe reverse people put in the bank. For example, if a brand new bank opened and 100 individuals saved $ 10 (USD), a cash position required from the bank would be based on $ 1,000 in stored funds. So the bank would be required to have at least $ 1,000 in cash to have money to pay each of these people if everyone came to take their money at the same time.

For corporations on the other hand, they determine how much money can be. In general, the company does not want too little money. Cash is required to finance business growth and to carry out purchases and services necessary to operate business. Cash can also be a sign of financial solvency and stability in society. However, cash generates a relatively low return on investment compared to other less liquid investments AS such that they have too much cash at hand may be a disadvantage for the company.

Investors can be in determination,Whether to invest or not, look at the cash positions of various companies. If the company does not have what is considered to be a suitable amount in cash, it may seem a bad investment. It is therefore necessary to achieve the correct balance for a public company that wants to attract investors.