Monday, July 18, 2011

Liquidity Risk

Define Liquidity risk

Liquidity risk refers to the difficulties that can arise from an inability of the company to meet its short-term financing needs, i.e. its ratio of short-term assets to short-term liabilities. Specifically, this refers to the organisation’s working capital and meeting short-term cash flow needs.

The essential elements of managing liquidity risk are, therefore, the controls over receivables, payables, cash and inventories.



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