1) To make Payment According to Payment Schedule:-
Firm needs cash to meet its routine expenses including wages, salary, taxes etc.
Following are main advantages of adequate cash-
To prevent firm from being insolvent.
The relation of firm with bank does not deteriorate.
Contingencies can be met easily.
It helps firm to maintain good relation’s with suppliers.
(2) To minimise Cash Balance:-
The second objective of cash management is to minimise cash balance. Excessive amount of cash balance helps in quicker payments, but excessive cash may remain unused & reduces profitability of business. Contrarily, when cash available with firm is less, firm is unable to pay its liabilities in time. Therefore optimum level of cash should be maintain.