Question

3. Discuss the importance of managing the U.S. Treasury’s cash balances in maintaining stable monetary conditions

Answer 1

Importance of U.S treasury cash balance-

• Cash balance in treasury will ensure liquidity and the organisation will be able to meet their debt obligations in time.
• It ensures sufficient surplus funds for further reinvestment and retained earning purpose. So that monetary stability will maintain.
• Treasury cash position will make sure that diversification of portfolio is required in order to mitigate the risk factors during market volatility.
• Cash management will identify the amount of cash inflows an organisation receive during every quarter and also the amount of money transferred through tax liability. As a result effective budget will be in place.
• Transparent cash balance reports will attract foreign stakeholders to invest in U.S market. Thus more capital will be generated and current account deficit will get reduced.
• High treasury cash balance will increases working capital for the company. Hence asset balance will be more in comparison to liability.

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