But if that same stamp store owns any stocks or bonds, those can be sold quickly, so those investments would be considered liquid.Ĭompanies use assets to run their business, manufacture items or create value in other ways. For example, a store that sells collectable stamps might hang onto its inventory to find just the right buyer to get the best price, which means those stamps are not very liquid. The easier it is to convert the asset to cash, the more liquid the asset. Or you might see you need to tap other investments and assets that can be converted to cash. These measures can give you a glimpse into the financial health of the business.įor example, you might look at your current and upcoming bills and see that you have enough cash on hand to cover all your expected expenses. It’s usually shown as a ratio or a percentage of what the company owes against what it owns. Liquidity is a measure of a company’s ability to pay off its short-term liabilities-those that will come due in less than a year. Healthy liquidity will help your company overcome financial challenges, secure loans and plan for your financial future. Liquid assets can be quickly and easily changed into currency. It’s a measure of your business’s ability to convert assets-or anything your company owns with financial value-into cash. Liquidity is a measure companies uses to examine their ability to cover short-term financial obligations. But looking at your company’s cash position is more complicated than just glancing at your bank account. Even with healthy sales, if your company doesn’t have cash to operate, it will struggle to be successful. East, Nordics and Other Regions (opens in new tab)īusinesses need cash to stay afloat.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |