May 01, 2013
James Aspromonti, Assurance Services Partner, Quoted in Bank of America Business Perspectives Newsletter Article "How to Avoid a Liquidity Crunch"
By Nathan Foster
Liquidity is a measure of business assets’ availability for conversion to cash—a critical element in meeting the ever-changing demands of a complex, competitive marketplace. Managing your liquidity position (and avoiding a liquidity crunch) helps ensure that your cash inflows and cash reserves are sufficient to cover your spending requirements and that the business doesn’t miss out on investment opportunities by having liquid funds sitting idle. Liquidity ratios are also used to gauge a company’s ability to repay short-term creditors from cash on hand. The lower a company’s liquidity ratio, the higher its risk of defaulting on its obligations.
It’s imperative for businesses to stay on top of their liquidity position, says James Aspromonti, a CPA and partner in Marcum LLP, one of the largest independent public accounting and advisory firms in the U.S. Businesses need to measure liquidity so that, among other things, they can:
- Pay outstanding debts as they come due
- Take advantage of time-sensitive investment opportunities
- Obtain financing as needed from banks or other lending institutions