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Hi sir, for cash surplus whether its short term cash surplus or long term cash surplus it should earn a return by being invested, without risk of capital loss because these funds will be required for the company’s working capital needs right ?
Or does this only apply to short term cash surplus ?Any surplus cash should either be invested (or used to repay borrowings).
However long-term cash should be invested in long-term assets – i.e. to (for example) by more machines and therefore increase profitability.
Short-term cash should be invested short-term if it is going to be needed to finance working capital.
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