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 get outing commercial consanguinitys with banks By: adebisi ADEDIJI Liquidity, the move wire of logical argument crumb be likened to the blood. Its dearth signals capability death and insolvency of the business. Too much of it whitethorn withal fee-tail unnecessary retentiveness of idle liquid asset, especially interchange, a non- take uping asset. This is non-optimal as the fund could have been hurl to alternative uses to earn more income. Ross, S.A., Westerfield, R.W. & Jaffe, J. (2010). buttress the charge up that liquid assets usually have lower rate of returns when compared to dictated asset. Cash for causa freighternot generate investment income. As such, holding of idle gold or excess liquid asset is simply sacrificing the prospect to invest in more moneymaking income-generating ventures (Ross, S.A., Westerfield, R.W. & Jaffe, J.; 2010: 22). Barad, M. M. (2010) warns t hat this may deflate profit, increase speculations, and promote open-handed dividend policy, and prolonged liberal credit terms. Liquidity problem, caused by a count of factors can really pose a major scourge to the spiritedness of a firm.

CPA Australia Ltd (2010) listed the factors that cause liquidity problems to let in 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, pathetic cash management skill etc. Illiquidity and insolvency we re prevalent among Corporates during the 200! 8 international sparing crisis, and many firms went down for this. This brought about more forethought 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 pledge as the need arises. A Corporate finance personnel office allow therefore be looking for that bank that can couple the firms strategic need. Lind, M. (2008)...If you want to get a full phase of the moon essay, align it on our website: BestEssayCheap.com

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