What is money in hand called?

Cash on Hand

Cash on hand refers to the physical cash that a business has in its possession. It is often kept in a safe or cash register and is used to cover minor expenses or make small purchases. Cash on hand is considered a current asset and is included in a company’s working capital.

Working Capital

Working capital is a financial metric that measures a company’s liquidity and short-term financial health. It represents the difference between a company’s current assets and current liabilities. Current assets include cash, accounts receivable, and inventory, while current liabilities include accounts payable, short-term debt, and accrued expenses.

Importance of Working Capital

Working capital is essential for a business to operate smoothly and meet its short-term obligations. It allows a company to:

• Pay suppliers and employees on time
• Cover unexpected expenses
• Invest in new opportunities
• Maintain a healthy cash flow

A company with a positive working capital is more likely to be financially stable and able to withstand unexpected challenges.

Factors Affecting Working Capital

Several factors can affect a company’s working capital, including:

• Sales volume
• Inventory levels
• Payment terms
• Credit policies
• Operating expenses

Companies can manage their working capital by optimizing these factors and ensuring that they have sufficient liquidity to meet their obligations.

Conclusion

Cash on hand is a component of working capital, which is a crucial metric for assessing a company’s financial health. Maintaining a positive working capital is essential for businesses to operate effectively and achieve their long-term goals.