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  1. Provides of EOQ Model and Derive the EOQ model from the total cost equation
  2. Provides of How to Setting the target cash balance
  3. Provides of Baumol Model (Cost of Cash - Holding Cost and TrnasactionsCost)


Financial Management in Cash Management & Inventory Control

Lecture Outline
1. Setting the target cash balance
2. EOQ model
3. Why is inventory management vital to the financial health of most firms?
4. Total Inventory Costs (TIC)
5. Derive the EOQ model from the total cost equation
6. Can the EOQ be used if there are seasonal variations?
7. The factors affect an EOQ analysis
8. Baumol Model
9. Costs of cash - Holding costs
10. Costs of cash - transactions costs
11. Optimal cash transfer size

Cash management is the process of collecting and managing cash flows. Cash management can be important for both individuals and companies. In business, it is a key component of a company's financial stability.

Theoretical models such as the Baumol model have been developed for use in setting target cash balances. The Baumol model is similar to the EOQ model, which will be discussed later. Today, companies strive for zero cash balances and use borrowings or marketable securities as a reserve. Monte Carlo simulation can be helpful in setting the target cash balance.

Why is inventory management vital to the financial health of most firms?
Insufficient inventories can lead to lost sales.
Excess inventories means higher costs than necessary.
Large inventories, but wrong items leads to both high costs and lost sales.
Inventory management is more closely related to operations than to finance.

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Financial Management in Cash Management & Inventory Control

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Number of Slides: 33 (includes cover, transition, & marketing slides)

Related Topic(s): Inventory Management Financial Management

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Initial upload date (first version): May 14, 2022
Most recent version published: May 16, 2022

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