A company can manage liquidity by: a. using one bank, b. spacing liabilities, c. borrowing only short-term Group of answer choicesmanaging solvencyspacing liabilitiesreducing liquidityminimizing enterprise value
Question
A company can manage liquidity by: a. using one bank, b. spacing liabilities, c. borrowing only short-term Group of answer choicesmanaging solvencyspacing liabilitiesreducing liquidityminimizing enterprise value
Solution
A company can manage liquidity by spacing liabilities. This involves strategically timing when liabilities are due to ensure that the company always has enough cash on hand to meet its obligations. This can help prevent situations where the company is suddenly short on cash. Using one bank or borrowing only short-term are not necessarily effective ways to manage liquidity.
Managing solvency is related but different, as it involves ensuring the company has more assets than liabilities in the long term. Reducing liquidity is not a goal for companies, as they need liquidity to meet short-term obligations. Minimizing enterprise value is also not a goal, as companies typically aim to maximize their value.
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