Showing papers on "Operating cash flow published in 1971"

Three Asset Cash Balance and Dynamic Portfolio Problems

Abstract: This paper describes the form of the optimal operating policy for a three asset cash balance problem in which 1 holding and penalty costs are proportional to the level of the cash balance, 2 the costs incurred in transferring funds between cash and earning assets are proportional to the amount of funds transferred, and 3 inflows and outflows of cash are to some extent random. There are assumed to be two earning assets, called “bonds” and “stock,” that can be used to change the level of cash. “Stock” assets are the major source of the firm's earnings, and they are assumed to have higher expected returns per period than bonds but also to have higher transactions costs. The major concern, then, is with how “bonds” should be used as a buffer against random fluctuations in the cash account.

A Note on the Transactions Demand for Cash

Abstract: In 1952 Professor William J. Baumol published an inventory model for determining the optimum transactions demand for cash.' The implications of this model have received considerable attention in subsequent literature, and the article has become a required reading for students of monetary theory. Considering the attention Baumol's model has received, it is curious that an apparent omission has not been recognized. Baumol presents two cases. In the second case the firm invests I dollars and withholds R dollars for transactions purposes during the period (RIT), then commences to disinvest in amounts, C, for the remainder of the period, (IIT). In deriving the demand for cash Baumol states, ". . . the total cost of withholding the R dollars and investing the I dollars will be

The effect of credit on the interest elasticity of the transaction demand for cash: comment

Abstract: IN A RECENT ARTICLE, A. S. Rama Sastry [3] examines the effect of credit on the firm's transaction demand for cash balances. Professor Sastry, essentially, applies a stationary deterministic inventory model that permits "backlogging" at a constant proportional cost.' This constitutes an advance over the inventory model used by Baumol [1] and Tobin [4] which did not permit short term borrowing. However, in his analysis of the interest elasticity of the firm's transactions demand for cash, Sastry makes the admittedly unrealistic assumption that the firm's short term borrowing rate, C2, is a constant2 with respect to changes in the firm's short term lending rate, i. The firm's short term borrowing rate includes both the tangible and intangible costs of short term borrowing and is referred to as the "cost of a cashout per dollar shortage." The firm's short term lending rate is referred to as the "opportunity cost of holding cash for transactions" and is correctly equated with the short term interest rate. Sastry derives the interest elasticity of transactions cash, IE, as:

Underlying Problems in Discounted Cash Flow Appraisal

Abstract: (1971). Underlying Problems in Discounted Cash Flow Appraisal. Accounting and Business Research: Vol. 1, No. 3, pp. 187-198.