Model Design Of The Optimum Cash Balance Involves Short-Term Finance

Cash management, which includes cash budget, cash collection and cash disbursement management, investing idle cash, is the crucial part of corporate finance. Determining the target cash balance is the groundwork. Nowadays, there are a great many of researches in this field, which study the theories and methods to determine the optimum cash balance under different hypothesis. This article develops a innovative viewpoint of this question involves short-term finance.First, the author presents the status quo of cash management, explains its aim, content and signification, inducts the concept of the optimum cash balance, and evaluates some of the representative models, such as the Baumol model, the Miller-Orr model, the cost-analysis model.Then, the author develops two revised models of the optimum cash balance which involves short-term finance. One of the models is a random model, which is a more general approach, tally with the reality of the enterprises operation, but having less practical convenience due to its mathematic complexity. The other model is a predigesting model under specific assumptions of cash movement, which provides a more practical solution for cash management.Finally, linking with the finance system of China, the author introduces a live case to discuss the investment-income-maximum orientation cash management, which consists of cash stream forecast, cash collection and investing idle cash. Since this typical case is coming from the enterprise practice, it will be expected to be of great worth to consult with.