Liquidity

How liquidity works

The assessment considers timing as well as asset totals. Cash, readily collectible receivables and available facilities differ from stock that may take months to sell. Restrictions on funds or borrowing availability also matter.

Practical UK business example

A profitable company has a substantial debtor balance but several large customers pay after payroll is due. Its short-term liquidity is weaker than its reported profit suggests.

Illustrative example only; not a finance quotation or a client case study.

Why it matters

Liquidity planning helps identify immediate payment pressure and choose a proportionate response before missed obligations cause wider problems.

Limitations and common misconceptions

Liquidity and solvency are related but different. An unused facility is not dependable liquidity if drawdown conditions cannot be met or the lender can withdraw it.

Discuss business borrowing to discuss how the structure relates to your business.