CASHÂ MANAGEMENTÂ MODELS Â Â
1)     Baumol’s Model —Baumol (1952) Cash can be managed in the same manner as inventory using Economic Order Quantity Model (EOQ model) .
C = √2FT
I
C = Optimal Transaction size
F = Fixed Cost per transaction
T = Expected cash payments during the period
I = Interest rate on Marketable Securities
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2)     Miller – Orr Model (1966)  ( Stochastic  Model )
Specifies two control limits
Upper Control Limit- When cash touches UCL marketable securities are purchased.
Lower Control Limit- When cash touches LCL marketable securities are sold.
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