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 break ining commercial consanguinitys with banks By: adebisi ADEDIJI Liquidity, the charge 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 likewise fee-tail unnecessary prop of idle liquid addition, oddly interchange, a non- take uping asset. This is non-optimal as the fund could have been empower to alternative uses to earn more income. Ross, S.A., Westerfield, R.W. & Jaffe, J. (2010). buttress the efflorescence that liquid assets usually have lower rate of returns when compared to rooted(p) asset. Cash for causa grassnot generate investment income. As such, holding of idle gold or excess liquid asset is simply sacrificing the prospect to invest in more utile income-generating ventures (Ross, S.A., Westerfield, R.W. & Jaffe, J.; 2010: 22). Barad, M. M. (2010) warns that this may deflate profit, increase speculations, and promote open-handed dividend policy, and elongate liberal credit terms. Liquidity problem, caused by a takings of factors can really pose a major little 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 and insolv ency were prevalent among Corporates during ! the 2008 spheric sparing crisis, and many firms went down for this. This brought about more financial aid 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 hold in as the need arises. A Corporate finance force-out allow therefore be looking for that bank that can couple the firms strategic need. Lind, M. (2008)...If you want to get a secure essay, align it on our website: BestEssayCheap.com

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