Liquidity is convertingassets to money.
because it can be used immediately such as shares of stock, alsobonds are considered as liquid, because we can sell them at any convenient timewe feel that we want to use them, and receive the cash within a few days. When investing,we need to pay attention to liquidity levels because it can time consuming to changeassets back into cash. Liquidity is vitalfor individuals and companies, liquidity of a business’s stock helps investors todeal with shares. The effect ofliquidity can be tested by studying liquidity ratiosA commonlyfinancial tool is Liquidity ratios used to analyze a company’s aptitude to payshort-term creditors by its cash trust. low liquidity ratios mean higher risk.
Liquidity ratios allow paying capacity on a short-term base. Arguments nearcash flows cash flow is straightforwardof how much money is made against how much is consumed in operations.Working cashflow can be unrecognizable in several different ways. AlteringAccounts PayableAccountants takein control when to identify payments made by the business, which are recordedunder accounts payable. Suppose a company writes a check and does not deductthat payable amount before the check is actually deposited, allowing the fundsto be reported instead in operating cash flow as cash on handMisusing Non-OperatingCashFast-track theAssembly of conventional or Delay Accrued Payments or Payablesworkingcapital accounts, are directly responsible of cash flow reporting are, only short-term fixes; byaccelerating receivables for the current period, the company is dropping themfor the next period.SellingAccounts ReceivableCompanese sell their remaining receivables which ismoney on the way, to another business in a lump sum, that will shortens the time that receivables are unresolved.This expands operating cash flow numbers for a short period. dealing withpotential accounting deception is by looking at free cash flow.
Cash FlowStatement, presents the movement in cash and bank balances over a period. Themovement in cash flows is classified into the following segments:ü OperatingActivities: Represents the cash flow from primary activities of a business.ü InvestingActivities: Represents cash flow from the purchase and sale of assets otherthan inventories (e.g.
purchase of a factory plant)ü FinancingActivities: Represents cash flow generated or spent on raising and repayingshare capital and debt together with the payments of interest and dividends. Statement ofCash Flows:Cash flowstatement therefore reflects the increase or decrease in cash flow arisingfrom:ü Change inshare capital reserves arising from share capital issues and redemption;ü Change inretained earnings as a result of net profit or loss recognized in the incomestatement (after adjusting non-cash items) and dividend payments;ü Change in longterm loans due to receipt or repayment of loans;ü Workingcapital changes as reflected in the increase or decrease in net current assetsrecognized in the balance sheet;ü Change in non-currentassets due to receipts and payments upon the acquisitions and disposals ofassets (i.e. investing activities) And the impotencyto it to my country is for the purpose of the impact which has been the growingexpectations of stakeholders, whether countrywide, regional or global.Stakeholders such as investors seek reliable financial information, to grow theirbusiness in the area, within the new 20/30 vision of Saudi Arabia the governmentis promoting the investors from outside the kingdom to invest, and with properfinancial tools as we mentioned they can do that knowing that their money issafe. “Thriving Economy Investing for the long-term” (2017) Atrill, P. & McLaney, E.
(2017) Accounting andfinance for non-specialists. 10th Ed. Harlow, UK: Pearson Publishing.