Personal Financial Liquidity Needs and Cash Management Techniques

Flashcards covering liquidity needs and cash management techniques in personal finance.

What is Liquidity?

How easily an asset can be converted to cash.

What is a Liquid Asset?

Cash on hand or an asset that can be readily converted to cash.

What are the Categories of Personal Financial Liquidity Needs?

Basic, Precautionary, and Discretionary Liquidity Needs.

What are Basic Liquidity Needs?

Those which require cash to meet daily living expenses.

What are Precautionary Liquidity Needs?

Those which require cash to meet unexpected events.

What are Discretionary Liquidity Needs?

Those which require cash to take advantage of lucrative opportunities.

How do you calculate the number of months an individual/family can meet expenses by tapping cash assets?

Dividing cash assets by monthly expenses.

What are some methods of Cash Management?

Bank Accounts, Time-Bound Investments, Tracking Expenses, Shopping

What are the Key Objectives of Cash Management?

Ensure Liquidity, Minimize Idle Cash, Maximize Returns, Control Cash Flows, Reduce Costs.