Optimization of the company's cash flow

Either they consist on interest or other financial costs to the amount of the loan intended to restore the
minimum cash;
Or, if the Bank grants overdraft, charges will be formed by financial charges which evaluation is set by the
banking regulation.
(b) The critical minimum is not respected, in the second place, if the Treasurer decides to postpone the payment
of overdue debts. In this case the costs come from renunciation of any discounts (cash discount, or on invoice),
and of a possible deterioration of the solvency of the company reputation.
5 - THE CHOSEN SAFETY MARGIN.
There is a relationship between the cost of breakdown of cash and the level of cash on hand at the beginning of
period. More the initial cash inflow is important more the cost of failure is low: firstly, because the probability of
being overdrawn decreases, then, because the amount likely overdraft is lowest. In addition, this safety margin
should be even higher that the dispersion of the probability distribution of expected net cash flows will be strong.
One sees immediately that this margin affects the profitability of the company. Preserved in the form of cash funds
have only a low return or not return at all. In addition, the firm supports the financial burden associated with
resources forming the counterpart of this cash.
The choice of a margin of safety depends on arbitration that will make the leaders between risk and profitability.
C – MODELIZATION OF THE COMPANY’S MONETARY INFLOWS MANAGEMENT.
The companies’ cash can be speculated to a monetary stock whose level depends on a number of variables. As in the
determination of the optimum volume of a stock of goods, two contradictory objectives guide the decision maker:
profitability and safety.
Searching for a better profitability led the Treasurer to minimize its cash. However, a certain amount of cash is
necessary to the survival of the company. The establishment of the optimum volume of cash is based on comparison
of the costs associated with each of the two objectives
The cost of breakdown of cash, on the one hand, which breaks down into:
Loss of purchasing opportunities,
Loss of the 0.05% gain for the company;
Obligation to borrow at high rates (Loans),
Deterioration of the credit of the company,
Possible insolvency,
Affects the company’s reputation for the bankers;
Etc.
And, on the other hand, the cost of bloated cash which includes:
The waiver to possible profits and remuneration,
Vulnerability to monetary erosion and, where applicable, the exchange rate.
The assessment of these costs, and consequently, the optimal level of cash corresponding to the minimum of these
costs is difficult to achieve. Indeed, most of them depend on the opportunities available to the company. More
difficult, perhaps, is to maintain the cash at its optimum level because of the large number of variables, sometimes
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