Liquidity is used
to convert assets to cash. because it can be used immediately such as shares of
stock, also bonds are considered as liquid, because we can sell them at any convenient
time we feel that we want to use them, and receive the cash within a few days.
we need to pay attention to liquidity levels because it can time consuming to change
assets back into cash.
Liquidity is vital
for individuals and companies, liquidity of a business’s stock helps investors to
deal with shares.
The effect of
liquidity can be tested by studying liquidity ratios
financial tool is Liquidity ratios used to analyze a company’s aptitude to pay
short-term creditors by its cash trust. low liquidity ratios mean higher risk.
Liquidity ratios allow paying capacity on a short-term base.
cash flow is straightforward
of how much money is made against how much is consumed in operations.
flow can be unrecognizable in several different ways.
in control when to identify payments made by the business, which are recorded
under accounts payable. Suppose a company writes a check and does not deduct
that payable amount before the check is actually deposited, allowing the funds
to be reported instead in operating cash flow as cash on hand
generate revenue, which is short-term investments.
Collection of Receivables / Delay Accrued Expenses or Payables
directly responsible for the reporting of cash flow are The working capital accounts,
only short-term fixes; by accelerating receivables for the current period, the
company is actually dropping them for the next period.
might securitize their receivables, which mean that they sell their outstanding
receivables (money that is almost certain to come in but has not yet) to
another company for a lump sum, which shortens the length of time that
receivables are outstanding. This inflates operating cash flow figures for a
short period of time. One method of dealing with potential accounting trickery
is by looking at free cash flow.
Statement, presents the movement in cash and bank balances over a period. The
movement in cash flows is classified into the following segments:
Activities: Represents the cash flow from primary activities of a business.
Activities: Represents cash flow from the purchase and sale of assets other
than inventories (e.g. purchase of a factory plant)
Activities: Represents cash flow generated or spent on raising and repaying
share capital and debt together with the payments of interest and dividends.
statement therefore reflects the increase or decrease in cash flow arising
ü Change in
share capital reserves arising from share capital issues and redemption;
ü Change in
retained earnings as a result of net profit or loss recognized in the income
statement (after adjusting non-cash items) and dividend payments;
ü Change in long
term loans due to receipt or repayment of loans;
capital changes as reflected in the increase or decrease in net current assets
recognized in the balance sheet;
ü Change in non-current
assets due to receipts and payments upon the acquisitions and disposals of
assets (i.e. investing activities)
And the impotency
to it to my country is for the purpose of the impact which has been the growing
expectations of stakeholders, whether countrywide, regional or global.
Stakeholders such as investors seek reliable financial information, to grow their
business in the area, within the new 20/30 vision of Saudi Arabia the government
is promoting the investors from outside the kingdom to invest, and with proper
financial tools as we mentioned they can do that knowing that their money is
safe. “Thriving Economy Investing for the long-term” (2017)