Which of the following statements are true or false?

Statement 1: Management of cash means management of cash inflow.

Statement 2: Cash management always attempts at minimising the cash balance.

Statement 3: In cash management, expected surplus cash, if any, is not considered at all.

Solution

Statement 1: Management of cash means management of cash inflow. This statement is False. Cash management encompasses both cash inflows and outflows. Effective cash management involves managing cash inflows to ensure sufficient liquidity and managing cash outflows to optimize spending and maintain an appropriate cash balance. Statement 2: Cash management always attempts at minimizing the cash balance. While cash management aims to maintain an optimal cash balance. The goal is to strike a balance between having enough cash to meet immediate obligations and minimizing idle cash that could be invested elsewhere for higher returns. Statement 3: In cash management, expected surplus cash, if any, is not considered at all. This statement is False. In cash management, expected surplus cash is indeed considered. Organizations strive to identify periods or situations where they expect to have excess cash and may plan to invest or utilize it more effectively, such as paying off debt, making investments, or generating returns.