Minimum cash balance

A minimum cash balance is a cash reserve kept on hand to offset any unplanned cash outflows. Without this safety buffer, a business might find itself unable to pay its bills. The use of a minimum cash balance means that a certain amount of cash is maintained in a bank account, rather than being invested elsewhere, used to pay down debt, or returned to investors as a dividend.

A minimum cash balance is most necessary in environments where there are large differences between the timing and amount of cash inflows and cash outflows.

Related Courses

Corporate Cash Management 
Treasurer's Guidebook