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14 August, 00:30

Astute money managers try to keep just enough cash on hand to pay employee wages and utility bills. this cash is referred to as:

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  1. 14 August, 01:03
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    transaction balances

    Explanation:

    Transaction balances refers to the cash needed to pay daily transactions.

    When a company has excess cash it means that this cash is setting still without producing any benefit. Cash is the most liquid asset, since it's already money. But cash doesn't earn any money, it even loses value due to inflation.

    A company should have the minimum amount of money needed as cash, just enough to cover its daily needs (transaction balance). This way it can invest remaining cash in something that generates interest, doesn't matter if the interest rte is very small, something is better than nothing.
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