How can cash discounts improve cash collections? What are the ramifications if a firm has too much cash on hand? How can the use of marketable securities be appropriate investments in the management of cash?

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Originally Posted by dfunk

How can cash discounts improve cash collections? What are the ramifications if a firm has too much cash on hand? How can the use of marketable securities be appropriate investments in the management of cash?

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Cash discounts encourage your creditors to pay earlier in order to receive the discount. This can keep cash flows steady for the company and also reduce the cost of trying to collect money.

Too much cash on hand means, you are keeping excess cash that you could be investing and earning interest. When you keep cash in hand, the company is losing the opportunity of earning some income.

How can the use of marketable securities be appropriate investments in the management of cash?