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Working Capital Management

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Working Capital Management

The decision to invest the funds in the federal money market would be shaped the organization’s needs. The company influences the type of investment the $7 million will be invested in as they wait for expenditure after three months. The business can use the $7 million in cash to invest in money market assets that mature within three months or a few days to three months to avoid inconveniences when money would be needed for expenditure. The business can invest the money in the financial, commercial paper for three months using the following options. First, make monthly investments, to grow the money, or make one three-month investment in the financial, commercial papers that matures in three months’ time (Reserve, 2019). The financial, commercial paper has the highest rate return (1.35) to the investment within the first three months in terms of investment (Boisjoly et al., 2020). For instance, applying the rates across the period means that the investor may get the money whenever it is needed and the invested in computed for the days or months the money was held in the investment.

The decision will be different if the money will be needed earlier than expected. The best choice of the money market instruments to invest in this case, would be in US government securities, Treasury Bills, which are secondary investment financial markets. The treasury bills are short term finical instruments that are considered to be highly liquid. Therefore the business will be able to access the money anytime it is needed (Hetzel, 2020). T. bills are the best financial instruments for the express purpose of raising funds to finance business expansion and special expenditures.

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