There is
importance of managing liquidity for a company because it has many beneficial for
who are interested in making an investment decisions. Let says a finance
company has to choose between investing in bonds and extending loans worth to
RM1 million. If the company decides for the second option, it would be able to
exercise more control.
It is because
they have liquidity on asset and cash from their account and how strength the
liquidity visible. If the company has no liquidity on their asset or statement
of account, they will get a trouble to operate their business. That is because
the element of liquidity is very importance to the company to attract shareholders
who are looking for a liquidity position and the profitability of a company.
However, based
on Olagunju (2011) had found liquidity will help a firm to avoid a situation
where a firm will be forced to liquidate with its attendant problems of selling
assets at distressed prices and the extra fees paid to lawyers, trustees in
bankruptcy and liquidators on liquidation. It can be concluded that liquidity
is inversely related to profitability. That means as liquidity increases,
profitability decreases and vice versa.
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