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Aug 20, 2022 · Adequate liquidity capacitates an organization to meet its obligations in time. Efficient liquidity management impact firm’s risk, return and share prices, and surmises its success or failure.
Jul 9, 2019 · Management of liquidity and liquid assets focuses on cash inflows and outflows along with a trade-off between liquidity versus investment of surplus cash in order to improve profitability.
- Eleonora Kontuš, Damir Mihanović
- 2019
Jun 27, 2024 · What is Liquidity Management: Types, Example & Strategies. Key Takeaways. Liquidity management ensures that a company has enough cash on hand to meet its short-term obligations and operational expenses. It maintains a balance between cash inflows and outflows, reducing financial distress risk.
We present such a model and use it to survey many of the empirical findings on liquidity management. In addition, we discuss agency-based theories of liquidity, the real effects of liquidity choices, and the impact of the 2008–2009 Financial Crisis on firms’ liquidity management.
- Is There An "Optimal Level" of Cash?
- Cash Versus Debt Capacity
- Alternative Forms of Liquidity
- The Role of Liquidity When Capital Markets Collapse
There is a general fascination with the level of cash companies carry on their balance sheets. Various figures are discussed in the media, among academics, practitioners, and even in Federal Reserve Board meetings. But this focus on–or search for–the optimal corporate cash level may be misplaced. In practice, the literature's focus on cash has been...
Firms can use external debt to fund their projects even when they face some financial constraints. In these situations, too, cash policy can be quite active, with corporate savings responding to firms' needs to optimize debt policy across time and economic environments. I studied this type of problem in work with Viral Acharya and Almeida.5We look ...
The foregoing work shows that cash creates financial flexibility because it ensures liquidity. Other forms of financing that rely on spot contracting, such as equity issuance and commercial paper borrowing, share the same drawback as reliance on debt capacity: Access may not be there when firms need it most. However, cash is not the only way in whi...
The relation between corporate liquidity and real activity came to the forefront of the academic and policy debate during the global financial crisis. The credit market breakdown started in 2008 and became acute in the spring of 2009. Firms' inability to obtain external funding allowed researchers to look at corporate liquidity management at a time...
Liquidity management contains a number of issues for CFOs to address, but the main ones come down to the question of how liquid the firm’s position ought to be, and how to maintain this given level of liquidity (through cash, lines of credit, hedging, or other mechanisms).
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Efficient liquidity management impact firm’s risk, return and share prices, and surmises its success or failure. Liquidity management is credited as a lifeline of every concern.
