Definition Liquidity, Liquidity Function and Components Inside
Definition Liquidity - term liquidity is one of the economic terms that are often used to indicate the financial position or wealth of an enterprise organization. The level of liquidity of an enterprise organization is usually used as a benchmark for decision-making people associated with the company. Some parties are usually associated with the level of liquidity of a company that shareholders, suppliers of raw materials, the company's management, creditors, consumers, governments, insurance agencies and financial institutions.
The higher level of liquidity of a company's organization, the better the performance of the company. Conversely, the lower the level of liquidity of an enterprise organization, the worse was the performance of the company. Companies that have a high level of liquidity is usually more likely to get some sort of support from external parties such as financial institutions, creditors, and suppliers of raw materials.
Understanding the definition and Liquidity
The term liquidity is basically a term that is absorbed from the English word meaning liquid fluid. The term usually indicates the level of liquidity of funds or property owned by an organization.
According KBBI (large dictionary Indonesian) itself, the notion of liquidity is cash or a cash position of a company and its ability to meet its maturing obligations in a timely manner; the ability to meet debt obligations on time.
Company's liquidity is usually shown in the form of certain figures like numbers quick ratio, current ratio figure, and the ratio of cash. Overall figures in three of this ratio is a comparison between the level of current assets to the amount of liabilities owned by the company.
function Liquidity
Liquidity has at least four major functions for the company are:
As a medium to carry out activities of daily business
The anticipatory funds - funds needed sudden or urgent
As satisfying customers (especially financial institutions) who wish to apply for loans or withdrawals
As a point of determining the level of flexibility of companies in the approval of investment or profitable business
Components in Liquidity
According to Engle and Lange, Liquidity has three basic components, namely the density, depth and resilience. The third component of liquidity are interrelated with each other to maintain the level of liquidity and the stability of the economic conditions of an organization or a company.
Density-Density is the gap that occurs in the price agreed with the normal price of a product.
Depth-Depth is the number or volume of products sold and purchased at a certain price level.
Resilience-resilience is the speed of price changes to the price of efficient after the course deviation or ketidaktabilan price.
Thus writing about the notion of liquidity as well as the functions and types of liquidity. Hopefully useful yes!
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Liquidity
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