Can liquidity problems be caused by bad cash flow management?

yes, there is a saying : cash is king , many big companies bankrupted not because of  slump but because a bad treasury /cash flow management

Greetings, Thanks for giving me an opportunity in reference to your question.
Yes, liquidity can create problems if you have a poor cash flow MGMT.
As an analyst point of view, we would like to see whether the firm is generating enough cash to run their operating activities.If a firm is not able to pay their dues to cover up their operations than this will be very critical and a major issue for any organization.
The main reason for poor cash flow could be if the company is not collecting its A/R on time, or they don't have cash budget and they are spending without a proper plan.
In investing activities an analyst would like to see a negative number , which gives us a sign that a firm in willing to expand the business and shows a long term planning.
On the other hand if its decreasing or has a positive cash flow then it could be an indication that a firm is selling its assets to increase the liquidity.
Lastly, financing activities shows if a firm has borrowed any loan from bank.
Loan will be an option in order to manage your cash flow which will give the flexibility to build your cash flows for the next few years.
As per the MGMT perspective loan should be utilized in a applicable manner.
From my experience , my advise to all Financial Executives is to prepare a long term cash flow forecasting plan where you can compare with actual results.
After all its all about the net profit but we would like to see how much cash has acquired in terms of profit.
I hope this will help you in understanding the poor cash flow MGMT concepts.
Thanks & Regards, Syed Faraz Hassan

Yes. A company may be profitable but have poor liquidity. This is affected by what type of approach used by the management.

Of course, bad cash flow management causes the financial crunch for the company. The inflow of cash from operations should be timely and sufficient to cover the outflow without injection of more funds and time differences. If funds are outgoing more rapidly then incoming or if there is negative time differences between the receipts and payments, then the company will face liquidity problems.  

"Liquidity" means flow and "cash liquidity" means of cash flow or cash movement in the organization. if a company run by its management and they have to failed to proper cash flow activites, especially in operational cash flow which consist of accounts recevable inventory and current payables. the management ultimatly , it is the bad  management   of cash flow.

Further, if a company cash genrate from operational activites and use this cash flow for investing or other financing activites then resultantly.the operational cash flow distrubed and company faced liqudity problems.

 

 

Yes it is true.

Yes it is. I will give an example: too aggressive sales policy plus trade credit and late payments may affect cash available in the company. This could be turned into timely repayment of your payables.