Question

When a business forecasts its free cash flows for an expansion it is planning, what is meant by “minimum required cash,” and what do businesses generally do with cash it retains above the amount needed for its projected transactions?

Answer 1

Minimum cash requirement are the minimum amount of cash needed by the management of a company which is also decided by its management to maintain the minimum cash which can be utilized atanytime when needed to avoid shortfall of cash and to maintain cash input and output during an accounting period.

When a business holds more cash than the amount needed the business can go for the expansion of its business by utilizing this cash to grow business which is also known to be Retained Earning or if that business is a listed company the company can payback to its shareholders