Cash Management Objectives
One of the prime responsibilities of the financial manager is that managing cash to make the balance between profitability and liquidity. In other words, he/she has to maintain the optimum cash balance. Optimum cash means it should not be excess or inadequate. Maintenance of excess cash reserve to meet the challenges, the excess cash will remain idle, and idle cash earns nothing but involves cost. So it will reduce profit. On the other hand, having inadequate cash balance will affect the liquidity of the firm. Hence, there is need to maintain the balance between profitability and liquidity. In other words, there should not be excess cash or inadequate cash.
From the above, we can trace the following as the cash management objectives:
1. To meet cash payment needs, and
2. To maintain a minimum cash balance.