Below you will find descriptions and details for the 1 formula that is used to compute optimal levels of cash (Miller-Orr model). Optimal cash level (Miller-Orr model): where F is the fixed cost of a securities transaction, V is the daily cash variance, r is the daily interest rate on marketable securities, and M is the minimum cash balance. Miller-Orr model. The Miller-Orr model model is used in management to make sure a company maintains an appropriate level of cash. While too much cash is expensive because of the opportunity cost of holding cash (interest can be earned by buying short-term securities), having too little cash is risky. A company uses the Miller Orr Model to manage its cash level. Suppose that short-term securities yield 5% per year and it costs the company $50,000 each time it buys or sells securities. The daily variance of cash flows is $1,000,000 and the bank requires $1,000,000 minimum current account balance.

Este modelo fue desarrollado en 1966, mejor conocido como modelo de Miller- Orr, también es conocido como modelo de determinación del saldo óptimo, este es usado para obtener el saldo de efectivo óptimo, donde el saldo de efectivo presenta fluctuaciones delimitados por un limite inferior y superior. 3. Orgler's Model According to this model, the optimal cash management strategy can be determined through the use of a multiple linear programming model. It is a model that provides for integration of cash management with production and other aspects of the firm.