From the course: Finance for Non-Financial Managers (2015)
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Strategies for cash management
From the course: Finance for Non-Financial Managers (2015)
Strategies for cash management
- [Instructor] So, let's begin by talking about cash management. How to manage the cash we have. As you can see here, we've got a graph from Toys "R" Us. It's their quarterly cash balance from 2002 through 2014 and you'll notice a pattern here. It's always lowest in October and highest at the end of January. Now why would that be? Well, if we stop and think about it, that's Toys "R" Us busy season. We'll realize that the holidays from Thanksgiving through December. They need cash building up to October to pay for all that inventory. They then receive all their cash in December and January once that inventory is sold. So it makes sense in the case of Toys "R" Us that they're going to have their lowest cash balance in October and their highest cash balance in January. Now, here's the question when it comes to managing cash. How to make sure they have sufficient in October. The last thing they want to do is run out of…
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