| The liquidity shortage is the immediate reason why lots of companies are insolvent.The meaning that we study the liquidity includes several points: First of all,it canguarantee the enterprise working well. Everyday,the enterprise purchases rawmaterials, disburses wage, renders tax and pays some necessary current costs, soenterprise have to keep liquid funds. If the enterprise has not enough liquidity, thenthe enterprise can not pay the costs of the production and the operating activities. Andthe enterprise can not use the discount. Furthermore,the client likely to do notdisburse payment for goods, it must disturb the normal production and operatingactivities. In order to avoid such risk, the enterprise always keeps more liquid funds.Secondly,guarantee the capacity of repaying the debt. If the enterprise has highliquidity,it also has high solvency. If the liquidity is not enough, when the enterprisehave to repay the current debt, it may have troubles. For instance, cash flow is notenough to repay the current loan. Thirdly, help the enterprise to improve it's ability ofborrowing the loan. The high liquidity means high solvency, high solvency means thatthe enterprise can borrow the loan easily.When we study the liquidity, we also use Current ratio, Acid-test/Quick ratio, Cashratio and Cash flow ratio and so on. These ratios incarnate that the more current assets,the higher the liquidity. And adding the current assets can make the liquidity higher.But the fact is not like that, the current assets include Cash, Receivable Account,Inventory and so on. When the enterprise adds the Receivable Account and Inventory,the liquidity not only be increased, but also be reduced. For example, if the sale ofInventory is dull, the cash flow must be reduced, it also makes the liquidity reduced.The liquidity ratio distinguishes long-term debt, depreciated value, Receivableaccount, Inventory, and so on. And the liquidity ratio think that the less the demand ofthe liquid funds, the higher the liquidity. Furthermore, the liquidity ratiodistinguishes different financing mode. So, in the disquisition, the author uses theliquidity ratio as the study index.The maturity matching approach is the base of the liquidity ratio. The maturitymatching approach means that the financing mode matches the maturity of the asset.The permanent working capital is the least capital that the enterprise needs in thelong-term. The temporary working capital is the capital that the enterprise needs withseasonal demand. The permanent working capital is like the fixed assets. First of all,the permanent working capital is long-term and stable. Secondly, when the enterprisegrows up, the permanent working capital grows up too, just like the fixed assets. Butthe permanent working capital is not the fixed assets, because the objects which thepermanent working capital makes up of are converted continuously. Wherefore, thepermanent working capital uses the long-term financing mode.The calculate formula of the liquidity ratio is underside.The liquidity ratio= Net Long-term Financing/Working Capital RequirementThe factors which can impact the liquidity ratio include Long-term Financing,Depreciated Value, Receivable Account, Inventory, Advances, Payable Account,Accruals.The disquisition includes five chapters. The first chapter "Introduction" includes "the liquidity and the indexes of the liquidity", "the meaning of the topic". The secondchapter is the overview of the literatures. It includes the literatures of liquiditydefinition, liquidity indices, solvency. The third chapter is about the base of the study,and the study method, and the data source. In the fourth chapter, the author figures outthe liquidity ratio, then analyses the liquidity ratio in the different years, then analysesthe liquidity ratio of whole electronic industry. The fifth chapter analyses the liquidityratio of particular enterprises. The last chapter summarizes the fourth chapter and thefifth chapter, and makes some suggestions to increase the liquidity ratio. |
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