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Miller-Orr Model Cash Flow Analysis

The document describes two models - the Miller-Orr model and the Stone model - that track a company's net cash flow over six days, including the beginning balance, net cash flow, and ending balance each day. It also establishes upper and lower control limits to evaluate if actions need to be taken to bring the balance back to the optimal return point of $175,000. Across both models, the balances generally stay within the control limits, so no actions are recommended.

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Shaikh Saifullah Khalid
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10 views4 pages

Miller-Orr Model Cash Flow Analysis

The document describes two models - the Miller-Orr model and the Stone model - that track a company's net cash flow over six days, including the beginning balance, net cash flow, and ending balance each day. It also establishes upper and lower control limits to evaluate if actions need to be taken to bring the balance back to the optimal return point of $175,000. Across both models, the balances generally stay within the control limits, so no actions are recommended.

Uploaded by

Shaikh Saifullah Khalid
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd

Miller-Orr Model

Day Beg Balance NCF End balance


1 150000 -25000 125000
2 125000 -75000 50000
3 175000 100000 275000
4 275000 -25000 250000
5 250000 125000 375000
6 175000

Stone Model

Day Beg Balance NCF End balance


1 150000 -25000 125000
2 125000 -75000 50000
3 50000 100000 150000
4 150000 -25000 125000
5 125000 125000 250000
6 250000

UCL 2 325000 Outer upper limit


UCL1 305000 Inner upper limit
LCL1 120000 Inner lower limit
LCL2 100000 Outer Lower limi
Actions taken
No Action Taken
125000
No Action Taken
No Action Taken
200000

Evaluation: 2-day look ahead


no eval. as cash balance is within the outer control lims
125000
no evaluation as within the outer control limits
no evaluation as within the outer control limits
no evaluation as within the outer control limits

upper limit
upper limit
lower limit
Lower limi
Disinvest this amount to bring back to ORP

Invest this amount to bring back to ORP

Actions taken
no action taken
no action taken
no action taken
no action taken
no action taken
Optimum Return Point Optimal Return Point 175000
175000 Upper Control Limit 325000
Lower Control Limit 100000

within the inner control limits


within the inner control limits
within inner control limits
within the inner control limits

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