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Publish On: 2019-05-06

Jason steev

Total Post: 475

Question: What is Baumol's Cash Model?

Reply On: 2013-06-22

Priancka

Total Post: 8

ANS: What is Baumol's Cash Model?

The Baumol model of cash management provides a formal approach for determining firm’s optimum cash balance under certainty. It considers cash management similar to an inventory management problem. As such, the firm attempts to minimise the sum of the cost of holding cash (inventory of cash) and the cost of converting marketable securities to cash.

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