Managing liquidity of the company

The term “liquidity” comes from the Latin word for fluidity, fluid. Thus, we can conclude that the liquidity of the company characterizes its movement. Or to be more precise, the ability of the enterprise's assets to easy mobilization. The greatest development of the concept of ‘managing liquidity of the company” received in the second half of the last century and it is associated with the development of the banking system. It was then, in connection with unprofitability of many state banks   and the emergence of a large number of commercial, began to develop methods of liquidity management of the Bank.

Currently, the term liquidity and liquidity management are used in relation to such economic entities as a commodity, the money market, enterprise, balance sheets etc. within specified fields of application of liquidity is a certain relationship established for a correct implementation of cost sharing (e.g. goods and money). While liquidity in this case is the ability avansirovannoy value after some time to return. At high liquidity, the repayment period is reduced.

In the case of the enterprise, liquidity is the ability of companies to react to financial changes (problems and prospects), the sufficiency of assets to pay short-term loans by transferring the assets into cash, as well as the ability to increase assets in the case of sales growth at the company.

Management of liquidity and solvency of the company

Without a doubt, the key to successful enterprise development is proper management of his finances. A very substantial part of financial management – financial stability analysis. Timely identification of financial problems, finding opportunities to eliminate them, and strengthening financial status – this is the liquidity management of the company. The analysis allows not only to assess the existing problems, but also to determine the strategy for further development  to build realistic plans, monitor their implementation and to assess results and prospects of activity of the enterprise.

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In modern Russia financial analysis and cash management of the enterprise as in the private sphere and at the state level is quite low, due to insufficient education of domestic professionals and little experience of financial analysis in the state as a whole.

A Comprehensive analysis of the enterprise is an assessment of a number of factors in the development of the enterprise. Under analysis are subject to both external and internal market factors and products, financial performance. It allows to assess the capabilities of the enterprise in terms of further development in their chosen field.

One  of the most important components of liquidity management of the company is an analyst of financial statements. The analysis goes in several directions.  

Horizontal method for the study – compared with the previous period of each of the item statements. It allows not only to track changes but also to predict the trends of growth or decrease. Vertical analysis allows to determine the share of certain expense items in the statements of one period. Trend research method  by examining each item in the statements allows us to identify some General trends and create a forecast. Also the computation of the coefficients, which allows to make a comparative analysis on the positions.

The methods of controlling the liquidity of the company are:

• The distribution of funds through various channels;
• Distribution of assets in accordance with the terms of the liabilities;
• Scientific management.

Liquidity Management involves the company placing such a Finance company that will allow in case of need quickly to pay off the obligations.