The acid-test ratio, also known as the quick ratio, is a liquidity metric that assesses a company's ability to cover its short-term liabilities with its most liquid assets.
A bank reconciliation statement reconciles the bank balance in an organization's books with the bank statement. Differences may arise from cheques drawn by the organization but not yet presented to the bank, bank charges deducted from the account not yet notified to the organization, and payments made to the bank but not yet recorded by the organization. Bank reconciliations are usually performed weekly or monthly and serve as a form of internal control.
In the manufacturing industry, the cash cycle represents the interval between the outlay of cash to procure raw materials and the receipt of payment for the manufactured goods produced from them.
Cash float refers to the notes and coins held by a business to ensure they can provide change to customers during transactions. This concept is essential for efficient cash management and smooth operational flow in day-to-day transactions.
A Cash Flow Statement is a financial document that shows the inflows and outflows of cash and cash equivalents for a business over a financial period. It is a crucial part of financial reporting.
Cash management involves the planning, monitoring, and execution of a firm's policy regarding liquidity to ensure adequate availability of cash for operational needs, investment opportunities, and unforeseen expenses.
The Cash Receipts Journal is a specialized accounting ledger used to record all cash inflows received by an organization. This ledger often records cash deposits into the organization's bank account and may be combined with other journals for comprehensive cash flow tracking.
Cash-flow accounting is an accounting method that focuses on the inflows and outflows of cash within a business, providing a clear picture of the company's liquidity.
A cash-flow budget is a tool that summarizes expected cash inflows and outflows of an organization over a budget period, usually prepared monthly. It serves as a planning aid to determine cash availability for investment or to identify cash deficits requiring additional finance.
A collection account is a specific type of bank account opened with the purpose of reducing bank float for remittances from specific customers or groups of customers, often those located abroad or who remit payments in a foreign currency.
Concentration banking is a financial management strategy aimed at accelerating cash collections from customers by utilizing a network of regional banks, from which funds are transferred to a central main concentration account.
An investment (e.g., shares) intended to be held for less than one year. See also fixed-asset investment.
A ratio that demonstrates the ability of a business to satisfy its current debts by calculating the time for which it can operate on current liquid assets, without needing revenue from the next period's sales.
An automatic transfer of funds from one bank account held by a company to another of its bank accounts, typically one that pays interest on deposits. The sweep takes place at the end of every day, or when specific conditions are met.
An imprest account is a simple yet effective means of controlling petty-cash expenditure, ensuring accountability, efficiency, and proper tracking of minor day-to-day business expenses.
Techniques often used at the end of a financial year to enhance a cash position and reduce borrowing by arranging for the settlement of outstanding obligations to be accelerated (leading) or delayed (lagging).
Liquid assets are those holdings that can be quickly and easily converted into cash with minimal capital loss, playing a crucial role in assessing a company's liquidity and solvency.
Liquidity management refers to the combination of day-to-day operations carried out by the financial management of an organization with the objective of optimizing its liquidity so that it can make the best use of its liquid resources.
Lock box services are advanced cash management systems used to streamline the collection and processing of receivables to enhance a company's cash flow efficiency.
Net cash flow refers to the difference between the cash that enters (cash inflows) and exits (cash outflows) an organization during a specific financial period. It can either be positive, signifying a cash surplus, or negative, indicating a cash deficit.
An outstanding check is a check that has been written by a company or individual but has not yet been cleared by the bank.
The term 'over-and-short' is frequently used in accounting to indicate discrepancies between recorded amounts and actual amounts, usually involving cash or inventory.
Petty cash is the amount of money in the form of notes or coins that an organization keeps on its premises to pay for small expenses.
Positive cash flow refers to the amount of cash that a business generates from its operations, which exceeds the cash outflows. It is a critical indicator of financial health, showing that a company is capable of meeting its obligations, reinvesting in its operations, and paying dividends.
Transactions demand for money pertains to the necessity of keeping liquid assets, primarily cash, on hand to manage daily transactions. This is a fundamental motive for individuals and businesses to hold money.
Working Capital Adjustment, specifically the term 'monetary working-capital adjustment', refers to the modifications done to the working capital of a business under current-cost accounting. It accounts for fluctuations in bank balances, overdrafts, and cash required to support daily operations.
