GENERAL KNOWLEDGE

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. Was this answer helpful?

Detailed explanation-2: -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.

Detailed explanation-3: -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? Liquidity answers that question.

Detailed explanation-4: -Liquidity ratios help lenders and creditors decide whether to give credit to a company or not. Federal Government, stockholders, and long-term creditors mainly rely on the solvency ratios because they show whether a business can meet its long-term financial responsibilities or not.