Optimal Cash Management as a Factor in Firms’ Income Growth and Financial Sustainability

Cash management plays a pivotal role in ensuring financial sustainability and profitability in modern firms. Efficient management of cash reserves, part of current assets, is a core tool in operational financial management, impacting liquidity and financial stability. Despite numerous theoretical models like Baumol’s EOQ, Miller-Orr’s stochastic model, and others, there remains a gap in integrating these models within developing economies, particularly regarding the optimization of cash balance in volatile markets. This research combines theoretical insights from well-established cash  management models with empirical data from Uzbek joint-stock companies. Methods include statistical observation, comparison, and systematic analysis, focusing on the impact of optimal cash management strategies on profit and liquidity. The study reveals that by determining an optimal cash balance and reallocating excess liquidity into financial instruments, firms can improve their profitability and maintain solvency. Notably, a moderate fluctuation in cash flows was observed, supporting the adoption of the "3σ" method for calculating optimal cash reserves. The application of cash management models resulted in a significant increase in profit. In 2024, for example, the reinvestment of surplus cash raised profit by approximately 106.2%. This research underscores the importance of integrating modern cash management methods for firms in developing economies. By balancing liquidity with profitable investment strategies, companies can optimize cash reserves, reduce financial risks, and enhance sustainability.