An organizations short term investment options for idle cash include what dour areas list and provid

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An organizations short term investment options for idle cash include what dour areas list and provid

Mamis Record interest rates can be a boon as well as a bane to small business. To take advantage of high returns, however, a company must put every available dollar to work and not leave idle cash in checking accounts.

Yet if the Boston group is any indication, firms are not tapping their investment resources despite the growing number of cash "parking lots" available. There are enough options today for any firm to select appropriate liquidity and safety while getting an advantageous return.

At least one high-yielding repository is set up so that putting idle cash to work does not require the intercession of the company controller. The service involves "sweeping" a checking account at the close of bank business each day and moving any balance over a specified amount into a money market fund, where it earns daily interest until it is needed back in the account.

Sources estimate the number of banks now providing this service at about three dozen. But Mastercard International announced in March that it will soon begin offering its 12, member banks the option of providing a similar service to their customers, and many of them are expected to take advantage of it.

The service gives the customer the choice of several different money funds. Alternatively, a business could run much of its checking directly through a money market fund.

Under the press of competition, just about every money fund provides free checking. Another stricture is that they may not accept third-party deposits -- drafts that are endorsed over to the depositor. But a money market account may neatly satisfy interest-bearing checking account needs.

Money funds pay dividends rather than interest. Money on deposit with them is invested for the most part in high-grade, short-term commercial paper and federal debt instruments.

Though accounts are not guaranteed, fund managers employ a prudent approach to risk. Interest is earned daily and posted monthly as a dividend via additional fund shares. To take maximum advantage of daily interest, fund managers recommend wiring in deposits.

And to keep deposits at work as long as possible, most money funds will wire out payments as well, thus paying interest through the last possible day. Discretion may dictate that a business leave funds on deposit at its bank.

But those funds need not be subject to the interest restriction imposed by the federal government on short-term deposits. Banks differ substantially in requirements and payouts.

Involvement can be as short as overnight. Another incidental service that some banks may offer to keep themselves competitive and their customers content is a "lockbox" arrangement.

In order to speed collections by a day or two and thus gain the use of funds that much more quickly, a business has its customers mail payments to a post office box in a central location.

The bank then picks up the payments and deposits them immediately. One of the earliest idle-fund parking lots was a bank certificate of deposit. A CD is issued for terms ranging from 14 days to several years, with interest rates increasing for the longer maturities as they do with many interest-bearing vehicles these days.

A certificate of deposit is not gold-plated, however. A certificate of deposit can pay monthly interest but usually pays at maturity. If monthly, this interest should be withdrawn and reinvested, and not left idle in a checking account.

These investments are similar to CDs but are issued by the financing arms of major corporations such as Ford Motor Credit, rather than banks, to meet short-term borrowing needs. Commercial paper is written for terms as short as one day and ranging up to days.

There can be three-quarters of a point difference in yields from the same borrower, depending on risk factor and maturity. A company seeking the liquidity of a money market fund but not willing to risk an investment in commercial paper can direct its excess cash into a recent arrival on the scene:An organization's short-term investment options for idle cash include what four areas?

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An organizations short term investment options for idle cash include what dour areas list and provid

An organization's short-term investment options for idle cash include what four areas? List and provide their characteristics.

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