MANAGEMENT

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: -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-3: -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-4: -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-5: -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?