What Is Cash On Hand?

Cash assets refer to the assets that a commercial bank can use to meet cash needs at any time. It is the most liquid part of the bank's asset business. Includes cash and demand deposits.

Cash assets

Right!

Cash assets refer to assets that commercial banks can use to meet cash needs at any time.

Cash assets as a bank

Cash assets generally include banks

The object of commercial bank operation is currency. The nature of the source of funds and the characteristics of business operations determine that commercial banks must maintain a reasonable

Commercial Bank Cash

Total compliance

Once cash is invested in an enterprise as an asset, it must be created to create value for the enterprise. The cash invested in the enterprise is no longer pure currency, but the cash assets of the enterprise. Assets are only valuable if they are used. And what aspects should be used to manage cash as assets?

Cash asset transaction speed

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As a means of exchange, cash assets must accelerate the speed of their transactions, that is, they must be continuously used for trading. The capital movement process of a company's transaction is expressed by the following formula: GWG, it is easy to see that the company's cash must be used to buy goods, and sell goods to get more cash in order to obtain profits. Therefore, cash management at least means that cash should be continuously invested in the transaction process, and any staying of cash does not mean the loss of profit opportunities. In addition, cash must be recovered quickly through transactions. In short, the faster the transaction, the more profitable it will be. In fact, once the cash is put into use, it will be converted into non-cash assets, which will bring profits to the company, but it may also suffer losses because the non-cash assets cannot be realized. Therefore, cash management must also consider the realizing capacity of the corresponding non-cash assets after the use of cash, including the amount of cash and the speed of cash.

Cash asset income and expenditure matching

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In the course of business operation, on the one hand, cash will be obtained due to sales behavior, and on the other hand, cash will be paid due to purchases. This creates a problem of matching revenue and expenditure. Theoretically, in order to reduce the residence time of cash in the enterprise, the best cash income and expenditure match is the same amount of cash inflow and outflow, and the time of inflow and outflow exactly coincides. If the matching of both can be fully realized, the company's inventory cash will be zero, which is the ultimate goal of the company's cash inflow and outflow management. We usually call the quantity matching of cash inflows and outflows as the quantity structure and the time matching of cash inflows and outflows as the term structure. In order to effectively match cash income and expenditure, enterprises usually achieve it by preparing a cash income and expenditure budget. The earliest cash income and expenditure budget usually uses the annual budget period, but because the time is too long, the cash income and expenditure expectations are often insufficient. Accurate, gradually converted into daily budget, even hourly budget, which is exactly the characteristics of catering to the high liquidity of cash income and expenditure. Therefore, the matching management of cash income and expenditure is more of an instant management. Through dynamic cash income and expenditure matching, the cash inventory can be approached to zero, and the cash payment risk can be avoided.

Optimal inventory of cash assets

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Judging from the matching management of cash inflows and outflows, it is impossible to completely achieve the matching in quantity and time and achieve the ideal state. In reality, at a certain point in time, the results of cash inflows and outflows will appear in two states: one is that the input is greater than the output, resulting in a cash surplus; the other is that the output is greater than the input, causing a cash shortage. Obviously, generating cash shortages will lead to payment risks, so companies must hold a certain amount of cash. The cash surplus will lead to an increase in opportunity cost or loss of time value of funds. However, no matter how fast the company puts its surplus into use, there will always be a time difference, so under normal circumstances, any company will form a certain amount of cash inventory. Theoretically, the lower the inventory, the better. As long as it can meet the needs of cash shortage, this inventory will reach the optimal state. Finance calls it the best cash inventory.

Cash assets cash quality

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The quality of assets refers to the ability to realise assets, including the amount of cash and the speed of cash. As a cashed asset, the quality of cash has reached its best. From this point on, cash has no quality management issues. So, what is the quality management of cash? The quality management of cash is mainly for the channels and purposes of cash inflows and outflows. The channels of cash inflows can be divided into borrowing channels, equity channels and operating channels. Obviously, cash obtained through borrowing is under pressure to repay. The borrower usually attaches a number of restrictive clauses to the borrower's money, so that the use of cash will not be free; the cash inflow from the equity channel will be bound by the investor, which is often called equity control. Such cash use also Not completely free; cash from operating channels, or more directly, cash from corporate profits, is not under pressure to repay, nor does it have any binding terms attached, and such cash will be very useful in use free. In financial theory, free cash flow is a very important concept. In fact, it is also an expression of the free state of the company when using cash. Because cash can only be used to achieve the function of cash assets, and the degree of freedom in the use of inflow cash is important to the function of cash assets, which is the essence of cash quality management.

As far as cash outflows are concerned, the risks faced by cash outflows are different due to the different uses of cash outflows. When using cash for the purchase of physical assets, the risks of cash outflows are relatively low due to the physical value of the physical assets. If cash is used to purchase intangible assets, because the physical value of intangible assets generally does not exist, the risk of cash outflows is greater; if cash is used to pay fees, the fees usually have no physical existence, making cash Outflows face greater risks. Therefore, the inflow of cash should increase the proportion of operating channels, and the outflow of cash should minimize the proportion of expenses.

In addition, cash itself has a purchasing power evaluation as a value means, but due to the effects of inflation or deflation, financial purchasing must also manage the purchasing power of cash itself, which is to prevent the purchasing power of cash from falling as much as possible.

Cash flow adequacy ratio

Cash flow adequacy ratio = net cash flow from operating activities ÷ (repayment of long-term liabilities + purchase of fixed assets + payment of dividends) The cash flow adequacy ratio is used to measure whether an enterprise can generate sufficient cash to pay debts, reinvest in fixed assets and Pay dividends. If the ratio is less than 1, you need to rely on other sources (financing and disposing of assets) to pay. To avoid repeatability and instability, it can be extended to more than one year.