Business Studies - 0450 CIE

Liquidity:

Gbogbo ọrọ náà

A business can be making a healthy profit on paper and still go under, all because it runs out of cash to pay its bills this week. The ability to pay short-term debts when they fall due is called liquidity, and it is often the difference between a business that survives and one that collapses.

In this lesson you will learn exactly what liquidity means, why it is so important, why it is not the same as profit, and how a business can improve its liquidity when cash gets tight. By the end you will be able to explain why a profitable firm can still fail and what it can do about it.

Ebumnobi

The concept and importance of liquidity

Akọmọ Ojú-ẹkọ

Many businesses, large and small, fail not because they are unprofitable but because they run out of cash. Suppliers, workers and lenders all want paying on time and will not wait. Understanding liquidity explains one of the most important survival questions in business, and it links directly to the topics on cash flow, business failure and finance.

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Ayẹwo Ẹkọ

Ekele diri gi maka imecha ihe karịrị na Liquidity:. Ugbu a na ị na-enyochakwa isi echiche na echiche ndị dị mkpa, ọ bụ oge iji nwalee ihe ị ma. Ngwa a na-enye ụdị ajụjụ ọmụmụ dị iche iche emebere iji kwado nghọta gị wee nyere gị aka ịmata otú ị ghọtara ihe ndị a kụziri.

Ị ga-ahụ ngwakọta nke ụdị ajụjụ dị iche iche, gụnyere ajụjụ chọrọ ịhọrọ otu n’ime ọtụtụ azịza, ajụjụ chọrọ mkpirisi azịza, na ajụjụ ede ede. A na-arụpụta ajụjụ ọ bụla nke ọma iji nwalee akụkụ dị iche iche nke ihe ọmụma gị na nkà nke ịtụgharị uche.

Jiri akụkụ a nke nyocha ka ohere iji kụziere ihe ị matara banyere isiokwu ahụ ma chọpụta ebe ọ bụla ị nwere ike ịchọ ọmụmụ ihe ọzọ. Ekwela ka nsogbu ọ bụla ị na-eche ihu mee ka ị daa mba; kama, lee ha anya dị ka ohere maka ịzụlite onwe gị na imeziwanye.

Liquidity is the ability of a business to: A. make a large profit B. pay back its short-term debts when due C. employ many workers D. export goods abroad Answer: B
Which is the most liquid asset? A. a factory building B. cash in the bank C. inventory of raw materials D. delivery vehicles Answer: B
A business that cannot pay its short-term debts is described as: A. profitable B. illiquid C. solvent D. nationalised Answer: B
A profitable business may still be short of cash because: A. it has no customers B. cash is tied up in credit sales, stock or new fixed assets C. it pays no wages D. it makes no sales Answer: B
Which action would improve a firm's liquidity? A. buying more stock on credit it cannot sell B. selling slow-moving stock for cash C. giving customers longer to pay D. spending all its cash on a new building Answer: B