BACHELOR OF BUSINESS ADMINISTRATION

BUSINESS ADMINISTRATION

FINANCIAL MANAGEMENT

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
Liquidity and Profitability are ____ goals for the finance manager
A
diffferent
B
separate
C
competing
D
finance
Explanation: 

Detailed explanation-1: -Liquidity and profitability are competing goals for the Finance manager. Under liquidity management, the Finance manager is expected to manage all its current assets including near cash assets in such a way as to ensure its effectivity with a view to minimize costs.

Detailed explanation-2: -Liquidity is a measure of the availability of cash and cash equivalent funds while profitability is the measure of profit a company can earn by selling its products or services. Both liquidity and profitability are related to the current assets and working capital of a company.

Detailed explanation-3: -The liquidity and profitability goals conflict in most decisions which the finance manager makes. For example, if higher inventories are kept in anticipation of the increase in prices of raw materials, profitability goal is approached, but the liquidity of the firm is endangered.

Detailed explanation-4: -Liquidity and profitability are two of your business’s most important key performance indicators. In their own way and together, they demonstrate whether your business currently is or can be successful and they indicate your potential for growth and sustainability.

Detailed explanation-5: -Balanced liquidity level is necessary for the effectiveness and profitability of a firm. Therefore, firms need to determine the optimum level of the liquidity in order to ensure high profitability. Liquidity should neither be too low nor too high. Rather, it should maintain a reasonable level.

There is 1 question to complete.