BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
Profitability Position
|
|
Liquidity Position
|
|
Market Share Position
|
|
Debt Position
|
Detailed explanation-1: -Liquidity position signify the short term solvency position of the company. Suppliers and creditors are short term liabilities, they are interested to know the liquidity position.
Detailed explanation-2: -Liquidity is a company’s ability to convert assets to cash or acquire cash-through a loan or money in the bank-to pay its short-term obligations or liabilities. How much cash could your business access if you had to pay off what you owe today-and how fast could you get it?
Detailed explanation-3: -Liquidity ratios are important to investors and creditors to determine if a company can cover their short-term obligations, and to what degree. A ratio of 1 is better than a ratio of less than 1, but it isn’t ideal. Creditors and investors like to see higher liquidity ratios, such as 2 or 3.
Detailed explanation-4: -The more liquid the assets of a business, the more quickly they can get cash to pay off their debt. Liquidity ratios are what creditors (and sometimes debtors) use to work out if a company can repay creditors from the total cash they have available.
Detailed explanation-5: -Understanding liquidity ratios Your creditors may often be particularly interested in these because they show the ability of your business to quickly generate the cash needed to pay your bills.