Question

What are some strategies that a company would employ to deal with cash shortages?

Answer 1

Liquidity refers to the ability to convert assets into cash quickly without incurring a loss. A business needs to monitor working capital to cover the imbalances of cash inflows and outflows and ensure sufficient liquidity. Ultimately, an efficient cash management system can increase a firm's overall liquidity. In turn, increased liquidity can lead to increased profitability and reduced risk of insolvency.

The primary goal of cash management is to use cash as efficiently as possible and in a manner that is consistent with the firm's strategic objectives and risk management profile.

Collecting outstanding debts, faster-increasing prices.

Negotiating better payment terms with suppliers - for example, delaying payment in exchange for regular or bigger orders.