Impact of liquidity and solvency on business operations of companies

• Main Authors: Marina Proklin, Jasna Zima
• Format: Article
• Language: English
• Published: Faculty of Economics in Osijek 2011-07-01
• Series: Ekonomski Vjesnik
• Subjects: assets; liquidity; lack of liquidity; solvency; money; debts
• Online Access: http://hrcak.srce.hr/file/105075

To provide undisturbed functioning of the market economy system, it is of extreme importance that each of its subsystems: business entity, economic operator, company, etc. is liquid and solvent. Furthermore, it is essential to maintain the continuity of liquidity and solvency, as it promotes the realization of goals of the economic system as a whole. Liquidity and solvency of companies are mutually dependent and related. Any decision taken in a company will have positive or negative effects, and will be related to liquidity and solvency in one way or another. Decisions with an effect of reducing or increasing liquidity and solvency will reflect on the overall business performance. Company liquidity is the ability of turning its non-monetary assets into cash in a relatively short period of time and without any losses. Company solvency is its ability to settle all due debts on their due dates with money available.