3.5.6

Liquidity

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Liquidity

Liquidity is in an indicator of how a business is performing.

Liquidity

Liquidity

Liquidity measures the extent to which a business has cash (or other current assets) to meet its immediate financial obligations.

Liquidity ratios

Liquidity ratios

The liquidity ratios include the current ratio and the acid test ratio.
These ratios are particularly important to a business' creditors. If a company is likely to struggle meeting its short-term debts, then this suggests that the business is at risk.

Meaning of liquidity

Meaning of liquidity

Businesses with higher liquidity ratios are better equipped to meet their short-term financial obligations.
To truly understand the meaning of a liquidity ratio, it is helpful to compare it to historic data (ratios from previous years), or to the ratios of competitors.
This will show if the business' liquidity is in line with current industry trends, or if it is an anomaly (and so more of a risk).

1

Business Activity & Influences on Business

1.1

Business Objectives

1.1.1Business Aims 1.1.2Business Objectives 1.1.3Business Objectives Change Over Time 1.1.4End of Topic Test - Business Aims 1.1.5Diagnostic Misconceptions - Profit

1.2

Types of Organisations

1.2.1Sole Traders & Partnerships 1.2.2Limited Companies 1.2.3Limited Liability 1.2.4Unlimited vs Limited Liability 1.2.5Not For Profit & Franchises 1.2.6Multinational Companies 1.2.7End of Topic Test - Business Ownership 1.2.8Application Questions - Business Ownership 1.2.9Diagnostic Misconceptions - Company vs Business 1.2.10Diagnostic Misconceptions - Owners vs Shareholders

1.3

Classification of Businesses

1.4

Decisions on Location

1.5

Business & the International Economy

1.5.1Globalisation 1.5.2Exchange Rates

1.6

Government Objectives & Policy

1.6.1Government Objectives 1.6.2The Government & Business Activity 1.6.3Interest Rates 1.6.4Interest Rates - Calculations 1.6.5Diagnostic Misconceptions - Recessions

1.7

External Factors

1.7.1External Factors

1.8

What Makes a Business Successful?

1.8.1Measuring Success 1.8.2Reasons for Failure

2

People in Business

2.1

Internal & External Communication

2.1.1Communication

2.2

Recruitment & Selection Process

2.2.1Types of Employment 2.2.2Recruitment Stages 2.2.3Effective Recruitment 2.2.4Legal Controls Over Employment 2.2.5Diagnostic Misconceptions - Internal Recruitment

2.3

Training

2.4

Motivation & Rewards

2.4.1Motivation in the Workplace 2.4.2Financial & Non-Financial Methods 2.4.3End of Topic Test - The Workforce 2.4.4Application Questions - The Workforce 2.4.5Diagnostic Misconceptions - Money

2.5

Organisation Structures

2.5.1Organisational Structures 2.5.2Centralised vs. Decentralised Structures 2.5.3Tall & Flat Organisations 2.5.4Functional Areas Within a Business 2.5.5End of Topic Test - Org Structure

3

Business Finance

3.1

Sources of Finance

3.1.1Internal & External Sources of Finance 3.1.2Factors Affecting Sources of Finance

3.2

Cash Flow Forecasting

3.2.1Cash Flow 3.2.2Consequences of Cash Flow Problems 3.2.3Cash Flow - Calculations 3.2.4Solutions to Cash Flow Problems 3.2.5Diagnostic Misconceptions - Cash Flow

3.3

Cost & Break-Even Analysis

3.3.1Costs, Revenue & Profit 3.3.2Profit, Average Unit Cost & Interest 3.3.3Costs - Calculations 3.3.4Revenue - Calculations 3.3.5Break-Even Analysis 3.3.6Profit & Losses - Calculations 3.3.7End of Topic Test - Finance 3.3.8Grade 9 - Finance 3.3.9Diagnostic Misconceptions - Fixed Costs 3.3.10Diagnostic Misconceptions - Break-even

3.4

Financial Documents

3.4.1Financial Statements 3.4.2Income Statement 3.4.3Understanding Business Performance

3.5

Account Analysis

3.5.1Business Calculations 3.5.2Gross Profit - Calculations 3.5.3Net Profit - Calculations 3.5.4Business Calculations 2 3.5.5Business Calculations 3 3.5.6Liquidity

4

Marketing

4.1

Market Research

4.1.1Market Research 4.1.2Forms of Market Research

4.2

The Market

4.2.1Customer Needs 4.2.2Satisfying Customer Needs 4.2.3Market 4.2.4The Competitive Environment 4.2.5Market Segmentation 4.2.6Market Mapping - Price vs Quality 4.2.7End of Topic Test - Marketing 4.2.8Application Questions - Marketing 4.2.9Diagnostic Misconceptions - Competition

4.3

The Marketing Mix

5

Business Operations

5.1

Economies & Diseconomies of Scale

5.1.1Economies of Scale 5.1.2Diagnostic Misconceptions - Economies of Scale

5.2

Production

5.2.1Production Processes 5.2.2Flow and Batch Production 5.2.3Production Efficiency 5.2.4Technology & Production 5.2.5Diagnostic Misconceptions - JIT vs JIC

5.3

Factors of Production

5.3.1Factors of Production

5.4

Quality

5.4.1Importance of Quality 5.4.2Identifying Quality 5.4.3Total Quality Management 5.4.4End of Topic Test - Operational Decisions

Jump to other topics

1

Business Activity & Influences on Business

1.1

Business Objectives

1.1.1Business Aims 1.1.2Business Objectives 1.1.3Business Objectives Change Over Time 1.1.4End of Topic Test - Business Aims 1.1.5Diagnostic Misconceptions - Profit

1.2

Types of Organisations

1.2.1Sole Traders & Partnerships 1.2.2Limited Companies 1.2.3Limited Liability 1.2.4Unlimited vs Limited Liability 1.2.5Not For Profit & Franchises 1.2.6Multinational Companies 1.2.7End of Topic Test - Business Ownership 1.2.8Application Questions - Business Ownership 1.2.9Diagnostic Misconceptions - Company vs Business 1.2.10Diagnostic Misconceptions - Owners vs Shareholders

1.3

Classification of Businesses

1.4

Decisions on Location

1.5

Business & the International Economy

1.5.1Globalisation 1.5.2Exchange Rates

1.6

Government Objectives & Policy

1.6.1Government Objectives 1.6.2The Government & Business Activity 1.6.3Interest Rates 1.6.4Interest Rates - Calculations 1.6.5Diagnostic Misconceptions - Recessions

1.7

External Factors

1.7.1External Factors

1.8

What Makes a Business Successful?

1.8.1Measuring Success 1.8.2Reasons for Failure

2

People in Business

2.1

Internal & External Communication

2.1.1Communication

2.2

Recruitment & Selection Process

2.2.1Types of Employment 2.2.2Recruitment Stages 2.2.3Effective Recruitment 2.2.4Legal Controls Over Employment 2.2.5Diagnostic Misconceptions - Internal Recruitment

2.3

Training

2.4

Motivation & Rewards

2.4.1Motivation in the Workplace 2.4.2Financial & Non-Financial Methods 2.4.3End of Topic Test - The Workforce 2.4.4Application Questions - The Workforce 2.4.5Diagnostic Misconceptions - Money

2.5

Organisation Structures

2.5.1Organisational Structures 2.5.2Centralised vs. Decentralised Structures 2.5.3Tall & Flat Organisations 2.5.4Functional Areas Within a Business 2.5.5End of Topic Test - Org Structure

3

Business Finance

3.1

Sources of Finance

3.1.1Internal & External Sources of Finance 3.1.2Factors Affecting Sources of Finance

3.2

Cash Flow Forecasting

3.2.1Cash Flow 3.2.2Consequences of Cash Flow Problems 3.2.3Cash Flow - Calculations 3.2.4Solutions to Cash Flow Problems 3.2.5Diagnostic Misconceptions - Cash Flow

3.3

Cost & Break-Even Analysis

3.3.1Costs, Revenue & Profit 3.3.2Profit, Average Unit Cost & Interest 3.3.3Costs - Calculations 3.3.4Revenue - Calculations 3.3.5Break-Even Analysis 3.3.6Profit & Losses - Calculations 3.3.7End of Topic Test - Finance 3.3.8Grade 9 - Finance 3.3.9Diagnostic Misconceptions - Fixed Costs 3.3.10Diagnostic Misconceptions - Break-even

3.4

Financial Documents

3.4.1Financial Statements 3.4.2Income Statement 3.4.3Understanding Business Performance

3.5

Account Analysis

3.5.1Business Calculations 3.5.2Gross Profit - Calculations 3.5.3Net Profit - Calculations 3.5.4Business Calculations 2 3.5.5Business Calculations 3 3.5.6Liquidity

4

Marketing

4.1

Market Research

4.1.1Market Research 4.1.2Forms of Market Research

4.2

The Market

4.2.1Customer Needs 4.2.2Satisfying Customer Needs 4.2.3Market 4.2.4The Competitive Environment 4.2.5Market Segmentation 4.2.6Market Mapping - Price vs Quality 4.2.7End of Topic Test - Marketing 4.2.8Application Questions - Marketing 4.2.9Diagnostic Misconceptions - Competition

4.3

The Marketing Mix

5

Business Operations

5.1

Economies & Diseconomies of Scale

5.1.1Economies of Scale 5.1.2Diagnostic Misconceptions - Economies of Scale

5.2

Production

5.2.1Production Processes 5.2.2Flow and Batch Production 5.2.3Production Efficiency 5.2.4Technology & Production 5.2.5Diagnostic Misconceptions - JIT vs JIC

5.3

Factors of Production

5.3.1Factors of Production

5.4

Quality

5.4.1Importance of Quality 5.4.2Identifying Quality 5.4.3Total Quality Management 5.4.4End of Topic Test - Operational Decisions

Practice questions on Liquidity

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1
Are businesses with a higher or lower liquidity ratio better equipped to meet their short-term financial obligations?Multiple choice

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Business Calculations 3

Market Research