Cash Management and Short-Term Investments

A brief description of the cash management practices and strategies used in the Amtrak Company

The contemporary business arena where cutthroat competition exists coupled with the global economic downturn has forced organizations to adopt cash management strategies that are effective to survive in unpredictable market conditions. Philippa (1997) argues that the organizations which employ better cash management practices have a competitive edge over rival companies since cash as a resource is always scarce and its management determines the success or failure of the organization. Organizations may decide to use different cash management techniques/strategies in accordance with their goals and objectives. For instance, the Amtrak Company which is a government-owned Railroad Corporation collects its cash receivables efficiently. According to Frank (2000), when an organization ensures that the account receivables are paid in a timely manner the organization increases its cash flow in that the amount of cash available is increased. This ensures that the organization is able to meet its financial obligations. Likewise, Amtrak uses a cash management strategy that ensures that the organizations’ debts are not paid immediately. The rationale behind this strategy is that cash is available since the organization is yet to clear its debts. This presents the organization with an opportunity to settle the debts which are most urgent. According to research findings, this cash management technique has a setback in that the company may be unable to meet its financial obligations when the debts are allowed to accumulate for a long period of time (Dimitris, 2002). Procuring materials where and when needed is another strategy that ensures that the organization manages its cash appropriately. Amtrak procures its resources when they are actually needed and this avoids committing funds to unnecessary projects.


Amtrak should focus on ensuring the organization’s debts are paid on time since the accumulation of debts may lead to a bad reputation once the company is unable to repay them. In addition, the company should adopt other measures which guarantee the availability of cash such as by engaging in short-term investments plans.

An assessment of the effectiveness of the short-term investment practices and strategies in Amtrak Company

The uncertainties in the modern business arena have forced organizations to commit their funds in investments that mature after a short period of time. Likewise, Investors are interested in investment opportunities that are supposed to yield returns within the shortest time possible. Amtrak Company engages in short-term investments such as auction-rate securities and short-term bonds. The company chose to invest in these short-term investments due to their short maturity date although they are of high risk. Financial analysts argue that short-term investments are appropriate for companies and organizations which may require their returns within a short period of time (Thomas, 1996). It’s imperative to note that, auction rate securities attract a high interest than other investments such as bonds and this justifies Amtrak’s decision to invest in them. According to Peter (2010), during the trading of auction-rate securities the market participants engage in a bidding process through the help of their brokers and the auction rate security is determined by the lowest bid. Short-term bonds, on the other hand, have a lower risk when compared to auction-rate securities. Due to its short-term maturity, short-term bonds can be affected by increased inflation rates. As all business ventures have a certain degree of risk, short-term bonds are no exception (Belverd, 2000). For instance, the change in bond rates is always a disadvantage although short-term bonds are less affected when compared to long-term ones.


The organization should also explore other investment avenues such as long-term investments. This can be attributed to the fact that investments which have a longer maturity period are less risky than those with a short maturity period. However, short-term investments have higher returns compared to long-term investments. This implies that Amtrak should analyze the available investment opportunity and then adopt the investment which will enable the organization to achieve its goals and objectives.

Reference list

Dimitris, N. (2002). Liabilities, liquidity, and cash management: balancing financial risks. New York: John Wiley and Sons.

Frank, J. (2000). Cash management: products and strategies. New Jersey: Wiley and Sons.

Philippa, F. (1997). Corporate Cash Management: Strategy and Practice. London: Woodhead Publishing.

Belverd, E. (2000). Financial and Managerial Accounting. London: Cengage Learning.

Peter, S. (2010). Guide to Investment Strategy: How to Understand Markets, Risk, Rewards and Behaviour. New York: Bloomberg Press.

Thomas, F. (1996). Understanding return on investment. New York: John Wiley and Sons.

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