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LIQUIDITY OF COMPANY WHAT ARE THE STEPS TO BE TAKEN

Business liquidity is your ability to cover any short-term liabilities such asu00a0loans, staff wages, bills and taxes. Strong liquidity means thereu2019s enough cash to pay off any debts that may arise. <br>All businesses will have assets which are highly liquid and ones which are not. Cash is the most liquid of all but other assets with high liquidity include shares or inventory provided you can sell it quickly. <br>

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LIQUIDITY OF COMPANY WHAT ARE THE STEPS TO BE TAKEN

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  1. Liquidity Of a Company - Steps To Be Taken?

  2. Introduction • Business liquidity is your ability to cover any short-term liabilities such as loans, staff wages, bills and taxes. Strong liquidity means there’s enough cash to pay off any debts that may arise. • All businesses will have assets which are highly liquid and ones which are not. Cash is the most liquid of all but other assets with high liquidity include shares or inventory provided you can sell it quickly.

  3. What is Liquidity Planing? • Essential liquidityThe amount required to cover essential business operations such as wages, rent, mortgage, utility bills etc. • Precautionary liquidityThis will be funds you can liquidate quickly and easily at a relatively low cost if you found yourself in a bind. For example, facing unexpected repair bills or legal fees. • Discretionary liquidityThis covers investment opportunities which are too good to pass up but tie up larger amounts of cash. However, you should still be able to access funds from these relatively quickly and cheaply should you need to.

  4. How Do I Create Liquidity Plan? • Invoicing and incomeMake sure you have a good handle on what’s coming in and when. It’s important to invoice on time and ensure people are paying on time so you don’t have an interruption in cash flow. You can make this easier with automated invoicing. • Look at your assetsMake a list of all assets within your business, their current value and how easy it would be to release the cash from each of them. This should be updated every few months as the business and market conditions change. It’s also good to know what steps would need to be taken to convert them to cash. • Prepare a financial forecastIf you start looking at your business projections and costing them out, you can identify any gaps in liquidity and any areas where you have excessive cash you might be able to invest. For example, if you plan to expand your premises, take on staff or buy better equipment

  5. How Can IImprove Liquidity?

  6. How Do I Calculate Liquidity ? • Current ratio • This is your total current assets divided by your total current liabilities. It is the simplest way to calculate liquidity. • Quick ratio • You calculate the quick ratio by dividing current assets minus inventory by current liabilities. Because inventory and prepaid expenses are omitted (because these are less liquid) it is a stricter test of liquidity. • Cash ratio • This test is stricter still because it only takes into account your most liquid assets. You calculate the cash ratio by dividing cash and cash equivalents by your current liabilities.

  7. Contetra Can Help • Strike that is A service that helps you get the details of “STRUCK OFF” companies, for hassle-free compliance with the new mandatorydisclosure requirement of schedule III. • Contetra provides solution for below two steps only by using below tool- Step 1- Step 2- Receive the output in recordtime (powered by our AI-enabled tool that scrapes throughMCA website for you – leaving noroom for manual errors) Upload your list MCA Struck Off  Vendors /supplierswith their GST numbers (whichis easily available with everyfinance team). For those vendorswhere GST number is not available,our tool can also do a PAN or CINbased search.

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