What is cash and liquidity management?
Cash management is the procedure of collecting, managing, and investing cash in the corporate sector.It plays a key role in ensuring an organizations financial stability and solvency. Business managers or corporate treasurers have the responsibility of managing cash.In order to increase a companys financial growth, business managers not only look to avoid insolvency but also try to find a way to reduce days in account receivables, to increase collection rates, to select short-term investment vehicles, and to increase days cash on hand.
When we talk about liquidity management,it takes one of two forms based on the definition of liquidity.One kind of liquidity can be defined as the ability to buy and sell an asset like as a stock or bond at its current price. Another definition of liquidity applies to big businesses such as financial institutions.Banks are evaluated on their liquidity or on their ability to meet cash and collateral obligations without suffering major losses.Liquidity management explains the efforts of investors or managers to decrease liquidity risk exposure in both cases.
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