The Money Market
Money Market In the above discussion of the reasons for holding cash and near-cash assets, It was suggested that near-cash, interest-earning assets could be substituted for cash when the motivation for holding these assets is the hedging of cash flow uncertainties or is the temporary investment of surplus funds. In either case, a primary concern of the cash manager is the safety and liquidity of the investment instrument used, since the money will eventually be needed for the operations of the firm. Near-cash assets of high safety and liquidity are traded in the money market. For larger corporations with strong financial positions, the money market also provides a source of short-term borrowings. It is important for the student of working capital management to be familiar With the basic instruments of the money market that are used by many firms as investment alternatives to cash and by larger firms as financing vehicles. While all the instruments traded in this market are quite...