An integrated analysis of production and financing decisions is presented. A model is constructed in which a cash storage unit is installed to manage the cash flows associated with production activities, such as raw material procurement, process operating setup, inventory holding costs and finished product sales. Temporary financial investments are allowed to increase profit. The production plant is modeled by the batch-storage network model with recycle streams. The objective function of the optimization is minimizing the opportunity costs of annualized capital investment and cash/material inventory minus the benefit to stockholders. The major constraints of the optimization are that the material and cash storage units must not be depleted. A production and inventory analysis formulation, the periodic square wave (PSW) model, provides useful expressions for the upper/lower bounds and average levels of the cash and material inventory holdups. The expressions for the Kuhn-Tucker conditions of the optimization problem are reduced to a subproblem and analytical lot sizing equations. This subproblem is then decomposed into two separable concave minimization network flow problems whose solutions yield the average material and cash flow rates through the networks. The production and financial transaction lot sizes and startup times can be determined by analytical expressions after the average flow rates are already known. It is shown that, when financial factors are taken into consideration, the optimal production lot and storage sizes are smaller than is the case when such factors are not considered. An illustrative example is presented to demonstrate the potential of this approach. (C) 2004 American Institute of Chemical Engineers.