The-Accountant-Sep-Oct-2017-Final

Business Practice and Development
liquid if the shares can be rapidly sold
and the act of selling has little impact on
the stock’s price. Generally, this translates
to where the shares are traded and the
level of interest that investors have in
the company. Company stock traded
on the Nairobi Securities Exchanges
non-liquid, or during after-hours trading
when fewer traders are active; at these
times, it is better to place a limit order
because the lower liquidity may lead to a
price you would not be willing to pay. A
ratio of 2 or higher, indicating you have
twice as many assets as liabilities, suggests
The company may prioritize on their
receivables and payables. By managing the
cash flow, the business will automatically
have a more focused opinion on their
assets and how and in what way to use the
assets. It also aids to have some working
capital to make the day to day transactions
Liquidity is important for both individuals and
companies. While a person may be rich in terms of total
value of assets owned, that person may also end up in
trouble if s/he is unable to convert those assets into cash.
The same holds true for companies. Without cash coming
through the door, they can quickly get into trouble with
their creditors. An understanding of the liquidity of a
company’s stock within the market helps investors judge
when to buy or sell shares, also helps investors avoid
those that might run into trouble in the near future.
can usually be considered liquid. Often,
approximately 1% of the float trades hands
daily, indicating a high degree of interest
in the stock. On the other hand, company
stock traded over the counter are often
non-liquid, with very few, even zero, shares
traded daily.
One thing to note as an investor when
placing an order is the liquidity of the
stock. During normal market hours on the
major exchanges, placing a limit order will
get you the price you are looking for. This
is particularly true for companies that are
your business is in good shape. A working
capital ratio of less than 1 indicates your
business may be in trouble.
One may be able to create a centralized
or a decentralized business model. The
former model will include a business or a
corporation having a single cash and flow
management solution which the entire
business and its departments have to follow.
A decentralized model, on the other hand,
affords the different departments to make
up their cash flow management depending
on their own needs.
easier and more efficient. The business
may also face the problem of trapped cash.
The company may have trouble accessing
the money in other countries and there
may also be problems in managing the
liquidity on hand. In the latter situation,
the company can develop internal liquidity
management departments rather than
external which only results in more
outflow of money.
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september - october 2017 7