Liquidity Management: A Case Study

Liquidity Management has been one of the most significant financial management terms since it includes extreme tradeoffs between risks and returns related to liabilities and short term assets. Cash Conversion Cycle is one of the most broadly used methods to assess and measure the risks and returns linked to liquidity management. It could be explain as the time takes to convert the cash into cash again like the time taken when the inventory or raw material purchased and after that the inventory sold and the company recovered the bills. Cash Conversion Cycle of the individual companies or we put together and taken the collective cycle of the industry; shows how well the companies are performing; moreover it will also guide

Organizations can increase their profitability by minimizing their length of cash conversion cycle through minimizing or reducing the receivables collection time period, minimizing or reducing the stock selling time period and increasing or extending the credit payment time period. Since every business organization is particularly focused about how to maintain and improve profitability, hence they have to keep keen eye on the factors impacting the profitability. In this aspect, liquidity management having its effects on returns and risks of the business organizations cannot be neglected by these organizations and so that cash conversion cycle being the sign of the liquidity management needs to be investigated as to how it may affect the profitability of the business units. Cash conversion cycle is also related to the Working capital management. Working capital management means the control over current assets and current

So a smaller number of days in the CCC may mean that the company is able to use stock quicker and gather excellent earnings quicker, relative to its payment on accounts. Efficient cash conversion may also suggest that paying quicker of payables, as there may be discount rates from providers which were give as the early settlement of accounts. Consequently, decreased credit expenses associated with holding stocks and receivables and decreased direct expenses associated with the receipts of discount rates may indicate that a smaller CCC results in higher productivity. The one of very significant element of business funds is the working Capital Management because of its direct effects on both the profitability and liquidity of the