Lessons About Cash And Manager Priorities

Abstract

Experienced managers know that cash affects virtually every aspect of a company’s strategy and operations. Business students and new managers, however, sometimes lose sight of the importance of cash amidst the details of accrual-based accounting courses, formula-based finance courses, and production-based management courses. We therefore use recent international research to reinforce practical lessons about cash and manager priorities. In particular, we examine why managers must focus on cash, how managers must balance cash with accruals in maximizing returns to investors, and how managers must cope with differing accounting priorities in obtaining needed information about cash.