Syllabus C4. Managing surplus cash balances 4 / 4

a) Define what is meant by “surplus funds” 
b) Explain how surplus funds may arise.
c) Discuss the objectives to be considered in the investment of surplus funds.
d) Invest surplus funds according to organisational policy and within defined financial authorisation limits.
e) Define the risk-return trade-off.
f) Outline what is meant by risk of default, systematic risk and unsystematic risk.
g) Outline how the Baumol cash management model works (note – calculations are not required).
h) Discuss the limitations of the Baumol cash management model.
i) Suggest appropriate liquidity levels for a range of different organisations.
Managing surplus cash balances