Working Capital Management - Liquidity

Overview


Forecasting Cash Needs


  • Expected Value Forecast - a simple calculation which tries to calculate a single forecast that represents the expected cash balances over time. Ignores the stochastic variability of cash balances.
  • Monte Carlo Simulations - attempts to capture the statistical nature of cash balances by simulating a number of different scenarios.

Cash Sources and Sinks


  • Contractually Defined Cash Flows - these typically occur due to the company's payroll and to set of fixed income holdlings (for positive cash flow) that reside in the Treasury's portfolio, or contractual payments on debt obligations. A
  • Expected Cash Flows - generally refers to cash flows that are not know in advance. The primary cash flow in this category is usually sales, but include expenses as well.

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