Cash management strategy | Business & Finance homework help
1. Interest rate fluctuations: Changes in interest rates can lead to changes in the cost of financing and demand for short-term investments, affecting a company’s cash flow and overall financial position.
2. Exchange rate volatility: Fluctuations in exchange rates can have an impact on the value of foreign currency-denominated assets held by a company, as well as any revenues or expenses denominated in foreign currencies.
3. Availability of credit: Companies need access to lines of credit and other sources of liquidity to manage their cash positions effectively, particularly during times when cash is tight or there are delays in collecting accounts receivable.
4. Cost of capital: The cost of debt and equity capital affects how much money companies need to raise from external sources and must pay back over time as well as their overall return on invested capital (ROIC).
5. Inflation: Increasing levels of inflation can reduce the purchasing power of a business’s cash reserves, making it more expensive for them to finance operations or make investments over time