*University of Tulsa IThe term liquidity as used in this paper refers to cash and marketable securities. The division of liquidity between these forms is not the concern of this paper. The interested reader is referred to Baumol  and Miller and Orr [lo]. 2For good discussions of the preparation of Cash Budgets see VanHorne [16. pp. 665-711 or Weston and Brigham [17, pp. 89-95]. 3For a good discussion of these decisions, see Baumol  and Miller and O m [lo]. 4This assumption could be easily modified to include only a certain percentage of sales and purchases as credit transactions; but in order to simplify the presentation the modification is not implemented in this paper. 79 The Financial Review 3. Cash Discounts-The cash discounts extended or received by the firm are not expected to change from the previous period. This assumption enables the previous periods cash payment and cash receipt cycles5 to be accurate estimators for future periods. Since the extension or receipt of cash discounts is intended to cause quick receipt on payments of accounts receivable and cause the firm to pay its accounts payable quickly, a change or addition of a cash discount is expected to
The Financial Review – Wiley
Published: Feb 1, 1974
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