[norseweather]

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?

[CaptainForest]

Marketable Securities tend to give a higher interest rate. Therefore keeping too much cash on hand means that you are losing out on potential higher interest rates.

You can improve collections by offering discounts. If companies pay within 15 days and get a 2% discount versus paying in 30 days with no discount, companies will most likely choose to pay within 15 days to get the discount and save themselves money.

[angelamcc2007]

Yes, I agree with the above comments regarding securities and discounts. Too much cash on hand i.e. a working capital ratio greater then 2:1 means that you could be losing interest (by not having it in a high interest account), also I would check the fixed assets - is the build-up of cash due to lack of investment there?

Good luck!

[bhet]

How can cash discounts improve cash collections? Cash discounts improve cash collection by giving terms in their invioce. For example company A will have a 10% discount if they pay their invioce within 10 days. Of course Company A will be try to pay within the 10 day period, if I am not mistaken any discounts forfieted by a company will lead to an account "Discounts fofeited," and thus it will result to additional exp.

What are the ramifications if a firm has too much cash on hand? A good business should have minimum money on hand. Because money on hand isn't growing but sleeping. Money should always be circulated if I may say so, or it should always be invested.

How can the use of marketable securities be appropriate investments in the management of cash? Marketable securities, these are the trading securities, Available for sale securities. If I am not mistaken, according to IAS it should be revalued at least once a year ifit incurred gains or losses. I think already know what will be the effects of gains and losses. But more appropriately, Trading secuties carry with them interest, thus we can generate inerest income. More importantly trading securies are acquired for resale if the market value is high. We can also generate some gains there if its market value is high.

PS. I think it would help if you get a copy of International Accounting Standards (IAS). Haven't red all of it, some part of it. Bin so busy in other major subjects. Have no time to read.