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Liquidity Cash Flow
Using the term liquidity to express criticism Ready or about the company's liquidity or liquidity of the asset, and we mean cash ready net cash flow, which is a cash flow within the minus cash flow to the outside, and the cash flow of the inside is all the processes that lead to the entry of cash to fund cash and bank balance of the company, while the cash flow of the outside it is all the operations undertaken by the company and lead to the exit critique them, also means the company's liquidity and the presence of liquid funds (cash and quasi-cash) is sufficient with the company in a timely manner to meet its obligations when due and to move its to meet the operational emergency liquidity while originally it means ease and quickly convert this asset into cash ready and remember without loss by the normal functioning of things.
Measure of liquidity
Can measure the degree of liquidity of the company by comparing their short-term its assets short-term to see how the ability of these assets to cover these needs, and is considered Current Ratio (current assets divided by current liabilities) common measure for measuring the company's liquidity can also use two measures other liquidity are net capital the worker and the quick ratio.
The importance of liquidity
The importance of cash flow from it:
1 supports the confidence of lenders by the company by building a good credit reputation.
2 continue in the company operations (operational activities) continuously.
3 to take advantage of the company's cash discount when you provide liquidity.
4 Avoid lending and not having to pay a high cost on borrowed money.
5-fulfillment of obligations at maturity and avoid the risk of falling into financial Balbeef.
6 face emergency conditions.
Liquidity Management means Cash Management, Cash is the main vital resource to execute Business.
For Mange Cash you have to follow the below important items:-
- Preparing plan to make balance between short term payment & receivable
Through action plan for cash available to operating Activities like periodic Payment (Rent, Payroll, Raw material, Telephone, Interest .................) and action plan for receivables to collect within company credit policy & other cash receivable.
- Also plan for Long term Payment & Receivable like Loans & credit suppliers ....... & receivable from investment.
- Plan to manage Emergency requirement for all company activities we have to be ready for any emergency to avoid any risk with internal or external sides.
Liquidity management- provide the tools to minimise idle working capital, optimally manage liquidity risk and intra-group positions and enhance the value of liquidity pools in local or foreign currencies, whilst maintaining a real-time visibility and control over cashflows anywhere in the world.
An efficient liquidity management structure is vital in optimising your working capital.
To manage the Cash or Cash Equivalent of the company, in order to insure liquidity of the same company with least opportunity cost is Liquidity Management.
Accountants in a company that deals in treasury have primary function of managing liquidity. it ensure that the company always honor any sort of payment. For that companies always put certain fund with bank. and these assets remains in Idle and not provide company with any marginal profits.
Liquidity mangers therefore manages these amounts and keeps there reserves in terms deposits, the terms can be from3 days, weekly till yearly, depends how much cash is required when.
