MANAGEMENT

Detailed explanation-1: -The liquidity decision is concerned with the management of the current assets, which is a pre-requisite to long-term success of any business firm. This is also called as working capital decision.

Detailed explanation-2: -The working capital decision is also known as a short-term investment decision. These are concerned with the decisions about the levels of cash, inventory and receivables required to be held by the business for its smooth functioning.

Detailed explanation-3: -Working capital is a metric used to measure a company’s liquidity or its ability to generate cash to pay for its short term financial obligations. Working capital is the difference between a company’s current assets, such as cash, and its current liabilities, such as its debts.

Detailed explanation-4: -Working capital is a financial metric that is the difference between a company’s curent assets and current liabilities. As a financial metric, working capital helps plan for future needs and ensure the company has enough cash and cash equivalents meet short-term obligations, such as unpaid taxes and short-term debt.

Detailed explanation-5: -Liquidity is having the money to pay the company’s obligations when they are due. In other words, it is the company’s ability to convert its current assets to cash so that the current liabilities can be paid when they come due. Liquidity is necessary for a company to continue its business operations.