Liquidity in Business

Liquidity in business refers to availability of cash in times of uncertainty or in times of unwanted cash outlay. It is the capacity of any business to be prepared for any cash disbursements without any burden on where to get some money. This aspect is very important in any kind of business.

In managing your own homebusiness, you should take into consideration the liquidity of your business. You should examine your business whether you have available cash ready for disbursements or whether almost all of your cash is invested in inventories or other non-cash assets. It is very important for you to know this for you to be prepared for any uncertain or unwanted cash outlays.

Some businesspeople prefer to invest more on inventory rather than having much cash tied up in their investment portfolio. This can be good for the reason that this cash invested in inventories can generate another income rather than putting it only in a bank for savings that can only produce a minimal level of interest.

Others prefer to lend cash to other people and apply a much higher interest compared to the bank's rate. There are others who would invest in a long-term investment like real estate, long-term bonds, etc. for them to be prepared for the future. The problem with these kinds of investments is that they can not produce instant cash in emergencies. There are some remedies for these instances. You can barrow money from other financial sources, you can place your properties up for collateral to acquire some money, or you can sell your structured settlements.

In managing a business, it is very important to have available cash to be used for emergencies or for other unforeseen payments that do not usually occur in a normal business operation. This is very important because sometimes the eventualities that we never prepared for are the very ones that can give us real burdens in the future. To have a good investment mix, you should know and analyze your business and insure that there is no over-investment occurring in the process.

You should have proper monitoring on the assets and liabilities of your business to know how much liquid cash should be taken into consideration. If in a certain instance that you do not have enough cash to cover your unprepared expenses, you can use other options to attain available cash. You can borrow from other sources or sell structured settlements. There are many ways to choose from, but the important point here is for you to have liquidity in your business.

Source by Clive Green