What is ‘Target Cash Balance’
The ideal amount of cash that a company wishes to hold in reserve at any given point in time. This figure hopes to strike a balance between the investment opportunity costs of holding too much cash and the balance sheet costs of holding too little. Companies with excess cash on hand may be missing out on investment opportunities, while companies that are cash poor can often be forced to make otherwise undesirable transactions to free up more operating capital.
Explaining ‘Target Cash Balance’
It is wise for individual investors to set their own target cash balance as well. Through portfolio management and clearly defined financial goals, investors can at least approximate what percentage of their holdings should be in cash to avoid the pitfalls listed above.
Target Cash Balance FAQ
What is a company’s cash balance?
Is cash balance an asset?
What is minimum cash balance?
What is a target balance?
What is a cash balance benefit?
How does a cash balance plan work?
- Managing target the cash balance in construction firms using a fuzzy regression approach – www.worldscientific.com [PDF]
- Cash holdings in SMEs: speed of adjustment, growth and financing – link.springer.com [PDF]
- The determinants of target cash holdings and adjustment speeds: An empirical analysis of Chinese firms – papers.ssrn.com [PDF]
- The combined effects of free cash flow and financial slack on bidder and target stock returns – www.jstor.org [PDF]
- The role of cash holdings in reducing investment–cash flow sensitivity: Evidence from a financial crisis period in an emerging market – www.sciencedirect.com [PDF]
- Corporate Governance, Ultimate Owner, and Target Cash Holdings: Evidence From China – journals.sagepub.com [PDF]
- On the determinants of SME cash holdings: Evidence from Spain – onlinelibrary.wiley.com [PDF]
- An empirical analysis of the determinants of the cash conversion cycle in Kenyan listed non-financial firms – www.emerald.com [PDF]