Question
PKG Ltd. maintains a minimum cash balance of Sh.500,000. The deviation of the companys daily cash changes is Sh.200,000. The annual interest rate is 14%.
PKG Ltd. maintains a minimum cash balance of Sh.500,000. The deviation of the companys daily cash changes is Sh.200,000. The annual interest rate is 14%. The transaction cost of buying or selling securities is Sh.150 per transaction. Required: a) Using the Miller-Orr cash management model, determine the following: (i) Upper cash limit (ii) Average cash balance b) The return points. c) Explain briefly the meaning of the terms: (i) Overtrading (ii) Overcapitalization
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Cases In Financial Reporting
Authors: Ellen Engel, D. Eric Hirst, Mary Lea McAnally
7th Edition
1934319791, 9781934319796
