Capacity Building
Liquidity and Enhancement–Synergy
Liquidity is a company’s ability to convert its assets to cash in order to pay its liabilities when they are due. Assets can be bought or sold, either as short-term or long-term investments.
The level of liquidity of any particular asset depends entirely on how quickly it can be sold and converted to cash of equal value.
A change or the process of change, brought about, to improve a product or service and to increase its value, is known as enhancement.
A variety of enhancements can be used in business to increase the efficiency and effectiveness of different processes and functionalities.
Benefits of liquidity and enhancement
Being able to use cash for smaller, noncapital purchases in a business avoids having to finance those purchases.
This reduces overall cost of purchases. It can provide other opportunities as well such as discounts for paying in full with cash.
- Liquidity ensures market participants the ability to buy and sell easily. This attracts speculators and investors to a market.
- Futures markets have been successful in attracting liquidity because they meet all of these characteristics. The higher volume and open interest, the more liquid a market.
- Investing in liquid assets is generally safer than investing in illiquid ones because of the ease of getting into and out of positions.
- Liquidity is important in cases of financial emergency. When you encounter hardship, you won’t necessarily have time to go through the process of putting your house on the market or selling your collection of rare artwork.
- Having cash ready to go in the event of a financial crisis will make getting through it a little more manageable and give you some peace of mind.
Examples of liquidity
- Market Liquidity. It refers to the extent to which a market, such as a country’s stock market or a city’s real estate market, allows assets to be bought and sold at stable, transparent prices.
- Accounting Liquidity. It measures the ease with which an individual or company can meet their financial obligations with the liquid assets available to them.
- It is universally considered the most liquid asset, while tangible assets, such as real estate, fine art, and collectibles, are all relatively illiquid
Think about your financial situation, and consider what you would do in an emergency. Would the investment tie up your assets to the point that you couldn’t easily access your wealth if you needed it quickly?
Plan your investments and your finances so that you have enough liquidity to meet your needs and goals. Take the time to make informed decisions about your company’s spending and borrowing by carefully monitoring liquidity in your business.
Synergy Financial Advisory team knows a lot about liquidity and enhancement. We are located at Surveyors Court, Woodvale Groove, Westlands.
You can give us a call on 0711712 000/0721947 604 for any inquiries. Visit our website and see other services that we offer.