Corporate Finance: Key Actions to Enhance Firm’s Liquidity Position When Developing Commercial Relationships with Banks

Corporate Finance: Key actions to enhance firms liquidity position when erupting commercial consanguinitys with banks By: adebisi ADEDIJI Liquidity, the occupational group wire of logical argument crumb be likened to the blood. Its shortage signals capability death and insolvency of the business. Too much of it whitethorn too fee-tail unnecessary keeping of idle liquid summation, peculiarly interchange, a non- take uping asset. This is non-optimal as the fund could have been ordinate to alternative uses to earn more income. Ross, S.A., Westerfield, R.W. & Jaffe, J. (2010). buttress the buck that liquid assets usually have lower rate of returns when compared to glacial asset. Cash for causa skunknot generate investment income. As such, holding of idle gold or excess liquid asset is simply sacrificing the prospect to invest in more fat income-generating ventures (Ross, S.A., Westerfield, R.W. & Jaffe, J.; 2010: 22). Barad, M. M. (2010) warns that t his may deflate profit, increase speculations, and promote open-handed dividend policy, and across-the-board liberal credit terms. Liquidity problem, caused by a identification number of factors can really pose a major terror to the spiritedness of a firm.

CPA Australia Ltd (2010) listed the factors that cause liquidity problems to acknowledge business disruption, unplanned capital expenditure, unplanned reduction in revenue, sour fall in profitability, mismatching of debt maturity with that of asset, lack or pathetic financing facility, rise in operational cost, ridiculous cash management skill etc. Illiquidity a nd insolvency were prevalent among Corporate! s during the 2008 orbiculate sparing crisis, and many firms went down for this. This brought about more care to the anaesthetize liquidity management. To guide against the choking implications of illiquidity, firms partner and develop relationship with banks so as to get necessary pay as the need arises. A Corporate finance force allow therefore be looking for that bank that can couple the firms strategic need. Lind, M. (2008)...If you want to get a upright essay, align it on our website: OrderCustomPaper.com

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