Cash Management Essay Example | Topics and Well Written Essays - 2250 words

Cash Management - Essay Example Over the course of the last couple of years many companies have faced some serious cash and inventory related problems, largely as the result of dramatically reduced or even negative sales growth. As a result, cash now represents only 5% of the total asset base for the typical distribution based company. It is a cash position that does not leave a lot of room for error and too much money left sunk in inventory. To offset the cash challenge, most firms have looked at ways to reduce their investment in other major asset categories. One category clearly stand out as being both large and controllable and that is inventor. As a result, serious efforts have been made to drain these assets that are considered as cash traps. While reducing inventory is a laudable effort, the action is fraught with danger. In both cases it is possible, and maybe even likely, that the drive to lower investment levels will trigger further sales declines. This would be because of a higher occurrence of out-of-st ock situations.