disscuss the factor that are likely to influence the desired level of cash a company

Expert Solution

Factors that influence the desired level of cash for a company are-

1.Type of Business: Manufacturing businesses have to keep more cash to meet their manufacturing expenses like- to buy raw materials and other procurements etc .in comparison to service providing businesses.

2.Credit Policy Of Business: A company that gives more time to its customers for payments has to keep more cash in comparison companies that have a conservative credit policy keep less cash.

3.Seasonal Factors: Some businesses are based on the seasonal demands of products and services. So it requires more amount of cash in business during the peak season of the year.

4.Type of Capital Structure: A company having more debt in their capital needs to have more cash to pay interest on the debt in comparison to a company having more equity may have cash.

5.Cash conversion cycle: It is directly related to the movement of cash. A slow Cash conversion cycle requires more cash in comparison to a fast cash conversion cycle.

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ekkarill92 answered 7 hours ago

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