Metro Manila University

Time Frame: 1990

Point of View: Mr. Aragon

Key Issue: How should Mr. Aragon take action on the large cash balance of Metro Manila University given the differing opinions of him and his subordinates?

Mr. Aragon finds the Php 50-million cash balance of the University to be very high. Keeping money of that amount puts it in a large risk, and prevents it from earning interest. Mr. Aragon believes that the University will be better off converting the money into treasury bills. Calling upon his subordinates, the chief accountant agrees with Mr. Aragon’s opinion however, the cashier believes that converting the money would not be advisable should a large withdrawal come up. Mr. Aragon is undecided regarding his course of action given that even his two subordinates, which have more experience than he does, cannot seem to agree on the matter as well.

Areas for Consideration

1. This was the first instance that Metro Manila University prepared quarterly financial statements.

2. Mr. Roces and Mr. Aragon both find the cash balance too high.

3. Although Mr. Aragon has great ability as a manager, the cashier is an expert on the matter.

4. Most cash disbursements to be made follow a regular pattern but some accounts have irregular cash needs; hence, these lead to the need for cash for ‘unforeseen payments’.

Assumptions

1. Metro Manila University will not have the same cash balance at year-end as departments would have used up their allotted budgets.

2. The University has always kept their cash in a savings account in previous years, and has never explored any investment option.

3. Most treasury bills and other securities to be invested in by the university are short term (30-day periods).

Alternative Courses of Action

1. Follow the cashier’s advice.

By keeping the money in the savings account, Mr. Aragon can be assured that all monetary transactions of the University will flow smoothly as with previous years. He would be maintaining the system that existed before he was appointed to the job. However, as a leader, Mr. Aragon may be compelled to innovate and challenge the existing system to improve the financial state of the University. Even if there were no active downside in keeping with the system, the promise