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In today’s world, business activities without cash are not possible. It makes the payment easy
or it is such a fund which can be utilized in future purposes. Therefore, it is treated as storage
of funds which is used to meet emergencies (Bari, 1981). At present, business uses credit
instead of cash for most of its routine work. Nowadays, the use of bills, draft, credit cards,
debit cards, ECS, fund transfer through Internet, etc. has replaced the use of coin and paper
currency (Bradley, 1974). Broadly, the term ‘cash’ refers to the currency money plus bank
account balances held at different commercial banks of the organization (Brandt, 1965;
Clarkson et al., 1972; and Driscoll, 1983).
Cash management is both the art and science of managing a company’s short-term
resources to sustain its ongoing activities, mobilize funds and optimize liquidity (Kim et al.,
1998; and Chiou et al., 2006). Cash management comprises three functions, they are—
(i) proper utilization of current assets and current liabilities of a firm throughout the operating
cycle of business; (ii) proper and synchronized planning, monitoring and management of the
company’s collections, disbursements and account balances; (iii) the collection and
management of information to use available resources effectively and also identify risk therein.
Improper risk avoidance through cash management may lead the company to bankruptcy. So,
efficient cash management not only prevents bankruptcy but also improves the profitability and finally reduces the risk of company (Jensen, 1986; Ferreira and Vilela, 2004; and Kalcheva
and Lins, 2007). It is important for the new and growing business that is trying to capture the
market share.
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