Liquidity has an important relationship with profitability. If we have enough liquid resources, we may be able to get benefit of cash discount on purchases and consequently that will be result in increasing profits. If we cannot pay the creditors for goods in the given period, we have to pay interest on the amount of purchases. Thus, shortage of liquid resources will result in low of cash discount and payment of interest. Both the losses will certainly decrease over profits. Secondly, we may keep the stock at desired manners and that will benefit us in circulation of business activities. Contrary to this, if we are not able to keep sufficient stock due to shortage of liquid resources, then the production cycle may not be continued and that will result in heavy losses.
Liquid resources of a business concern for all over to expand huge business activities more, and less in financial. In case of steel industry in India, the management of liquid resources plays a greater role because in comparison to others industries, this industry has capacity to pay its obligations promptly.
SIGNIFICANCE OF A STUDY FOR STAKEHOLDERS :
The above study is made for the point of all live participants who are interested in the routine of the business organization. Those are as under.
(1) Management Point of View:
The above study plays vital role in providing such information to the management, which needs for planning decision-making and control e.g. operational efficiency analysis provides gross profit, operating expenses analysis and profit margin. Asset management outlines asset turnover, working capital under inventory turnover, accounts receivable and payable profitability position shows return on assets, earning before interest and taxes
(EBIT), and return on assets. Gesternberg effectiveness of its own policies and decisions, determine the advisability of adopting new
policies and procedures and documents to owners as result of their management 8 efforts
(2) Important to Investor:
According to Erich A.Helfert ―Importance investors should know easily. The financial position of the company by return on net worth,
return on common equity, Earnings per share, Cash flow per share, Dividend yield, dividend
9 .
coverage, Price earning ratio, marketThepotential to b investors of the business organization in turn are interested in the current features.
(3) Creditors Point of View:
Creditors doing business with company simply study its performance by current ratio, acid test ratio, and debt to assets, equity and capitalization, interest coverage and principal coverage before lending the finance. The study of these describes real features of business organization to the creditors.
(4) Government Point of View:
Government has significance to study liquidity productivity and financial efficiency of an individual organization or industry as a wholvarious. Taxes, revenues, financial assistance, sanctioning, subsidy, to a business organization or industry as well as price fixing policies, frame outlines the key role of study for the Government lies in planning, decision making and control process.
(5) Employees and Trade Unions Point of View:
Employees are resources of the company and are interested to know the financial position and profit of the company. Generally they analyze by the comparison between past and present performnace, profit margin and cash flow of the company. Trade unions are interested to know the data of financial performance pertaining to their demands for increase in wages, salaries, facilities, and social welfare.
(6) Society and Others:
Society and others are including in external environment of the company and every business organization has a greater responsibility towards society.
In this context performance should be studied through various types of social elements such as customers investors, media, credit institutions, labour bureaus, taxation authorities, economists are interested for the study of a business organisation while society as whole also looks forward to know about the social contribution, i.e., environmental obligations, social welfare etc.
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Thank You For Useful Information.
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