What kinds of transactions are often considered in a liquidity analysis?

Published on 2018-05-14

Transactional alternatives that are frequently considered in a liquidity analysis include the following: a)Sale of the company’s stock in an initial public offering b)Sale of the company to a strategic acquirer c)Sale of the company to a financial investor d)Sale of a minority interest in the company to a passive investor e)Sale to the company’s existing management f)Sale of the company […]

What is the framework of audit in China?

What are the purposes of liquidity analysis?

Published on 2018-05-14

The purpose of a liquidity analysis is to provide the business owner with an objective view of the value of his or her company. Furthermore, a liquidity analysis will help the business owner to understand the alternatives available that will permit him or her to tap into the wealth that may be trapped there. A liquidity […]

What are liquidity ratios?

Published on 2018-05-14

The following liquidity ratios are all designed to measure a company’s ability to cover its short-term obligations. Companies will generally pay their interest payments and other short-term debts with current assets. Therefore, it is essential that a firm have an adequate surplus of current assets in order to meet their current liabilities. If a company […]

What is the framework of audit in China?

What are the factors that affect liquidity management strategies?

Published on 2018-05-14

Liquidation of assets and maintaining borrowing reserves are two major liquidity management strategies. The dimensions of liquidity that affect these strategies include: Time necessary to covert assets into cash. Loss of value as a result of liquidation of assets. Availability of borrowing reserves.

What should be taken into account in designing capital structure?

Published on 2018-05-14

Because there is no optimal capital structure, the choice between debt and equity will depend on a number of considerations: a)       Macroeconomic conditions. High real (inflation-adjusted) interest rates and low activity     growth will prompt companies to de-leverage. Inversely, rapid growth and/or low real interest rates will favor borrowing. b)       The desire to retain a degree […]

What is the framework of audit in China?

How do companies determine their capital structures?

Published on 2018-05-14

The two most influential theories of capital structure are the tradeoff and pecking order theories. The first, the tradeoff model, argues that companies trade off the benefits of additional debt (tax deductibility of interest expenses, reduced agency costs of free cash flow) against the costs (bankruptcy risk) and at the margin equate the two. The […]