Liquidity

• what is cash?


  money which exists in a business at a point in time in the form of a cash in hand or at the bank. it is avaliable for immediate use.
• what is a statement of financial position?

  a formal financial document that summaries the net worth of a business at a given point in time. it balances net assets with total equity.
• what are assets?


  items of value owned by a business
• what are liabilities?


  anything that a business owes and is therefore in debt to a third party
• what are current assets?

  Assets that are expected to be converted into cash or used up within one year.
• what are current liabilities?

  Current liabilities are debts or obligations that are expected to be settled within one year
• what are payables?


  Amounts owed by a company to its creditors.
• what are receivable?


  Amounts owed to a business for goods or services provided.
• what is liquidity?


  the ability to meet day to day expenses and short term debts
• what is current ratio?

  Current ratio is a financial ratio that measures a company's ability to pay off its short-term liabilities with its short-term assets.
• what is acid test ratio?


  a tough measure of a firms liquidity
• what is working capital?


  a measure of a firms liquidity
• what is the equation for acid test ratio?


  liquid assets/ current liabilities
• what are causes of cash flow problems?

  • low profits
  • too much production capacity
  • stock held
  • allowing too much credit
  • overtrading
  • unexpected changes
  • seasonal demand
• what can be done to improve cash flow?

  • sell surplus
  • reduce current assets
  • increase current liabilities
  • increase equity
  • cut back on planned investment