Whenever any long-term investment is considered the future cash flows from the project, the uncertainty of those cash flows, and the opportunity cost of the funds invested in the project are evaluated. Investments in current assets are also evaluated by all organizations in the same manner but over a short-term period. The time value of money plays an important role in the valuation of long term investments as these investments produce expected cash flows into the future. In the case of current assets (cash, marketable securities, accounts receivables, inventory) provide expected cash flows only in the short term, therefore the time value of money is of lesser importance while evaluating current assets. Whenever decisions are made for new product development and marketing there is capital investment. Investments made in current assets support the day to day operations of the firm. Therefore investment in long term projects there has to be investment in current assets in order to support the day to day operations that will be required by the project. Current assets are the "Working Capital" put together to work in order to generate benefits monetary or other wise from the investment made.The type of business, whether extractive, retail, manufacturing or service, affects the way an organization invests. In some industries, large investments in machinery and equipment are necessary. In other industries, such as retail firms, less is invested in plant and equipment and other long-term assets and more is invested in current assets such as inventory and receivables.
[...] Bank - Fast Collection Service SBI - Cash Management Product HSBC - Chequemate DEUTSCHE - H/V MICR LOCKBOX Local clearing of cheques through non-branch locations across India Integrated MIS with customization for select relationships Concentration of funds in a central account Cheque pick-ups at the center with return cheque deliveries also the same center Flexibility to define credit arrangements for each customers QUICKENCASH Utilities and arrangements with correspondent banks to enable faster clearing of cheques Allows the customer to receive credit on a fixed day, say, day 0 for discounted cheques and day 8 for regular collections Interest charged on return cheques for period for which the bank is out of funds Consolidated MIS provided Courier pickup provided for select relationships QUICKCOLLECT Collection of upcountry cheques drawn on any location in the country In the case of instant credit [...]
[...] They maintain a lot of surplus cash in their main operating account, as they do not know when the cheques that they have issued will hit the counter. This is in the case when they issue dividend warrants. They would like to get interest on the surplus funds lying in the account. They use ECS to make payments. HDFC currently has 41 branches and they have access to another 60 locations via Vijaya Bank. Salary payments are done via HSBC. [...]
[...] Cash management has very simple goals: Have enough cash on hand to meet immediate needs, but not too much Get cash from debtors as soon as possible and pay it out to creditors as late as possible The Baumol and Miller-Orr models help in managing cash to satisfy the first goal, but the second goal requires methods that speed up incoming cash and slow down outgoing cash. This is illustrated later in the various collection models defined later on in this project. [...]
[...] The next step in the cash management process is how much cash should an organization hold? Firms hold some of their assets in cash for several reasons. They need cash to meet transactions of their day to day operations. Referred to as the transaction balance, the amount of cash needed for this purpose differs from firm to firm depending upon the particular flow of cash into and out of the firm. This amount depends upon: 1. The size of the transactions made by the firm 2. [...]
[...] Details which are included in a DD in India are as follows: Beneficiary name Amount (figures and words) Date Drawee bank Drawee bank address Signature Drafts drawn on correspondent bank normally give ceiling limit of cheques which can be issued Pricing is also done based on urban and semi-urban locations. A minimum balance needs to be maintained at the correspondent bank. The correspondent bank sends back a monthly report on outstanding and cancelled DD that leads to reconciliation issues. Income earned is fee based. [...]
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