Liquidity Management Case Study

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1.6 Objectives of Liquidity Management:
In the balance-sheet approach, the objective of liquidity management is to provide for the optimal level of liquidity. However, providing for financial mobility at minimum cost should gain priority as the main objective of liquidity management in the flow approach. As a result, three basic activities cash flow planning, implementation of early warning systems and resource planning for financial mobility should constitute the content of liquidity management in the same approach. These ideas proceed from the author’s attempt to integrate with the general theory, Donaldson’s concept of “financial mobility” and his notion of a strategy for its development (1969a; 1969b).
Measuring liquidity for any future
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To fulfill its objective, liquidity management should comprise three basic activities: cash flow planning, implementation of early warning systems and resource planning for financial mobility.
Providing for financial mobility at minimum cost should be the main objective of liquidity management in the flow approach. Three basic activities therefore cash flow planning, implementation of early warning systems and resource planning for financial mobility should constitute the content of liquidity management in this approach.
Cash flow planning is the means of ensuring funds flow equilibrium in the firm under future expected conditions. Cash flow planning is an element of financial planning and this, in turn, is an intrinsic part of corporate planning. Risk and uncertainty are the essence of corporate planning. Therefore, despite the image of precision surrounding the corporate plan, management is aware that unknown, uncertain or less likely events at the time of the plan preparation (i. e. unexpected events) may subsequently
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Writers such as Ward (1970), however, express reservations about such an assumption. In fact, in most strategic situations, it is not so much a case of identifying a market opportunity as of matching the resources which exist or can be readily acquired to the business opportunities which can be discovered and exploited. This idea became particularly relevant during the 1970s with the development of a world-wide resource crisis, characterized by shortage and fast rising prices of many resources. The need, felt at the time, to develop and implement a strategy for resources gave rise to a new subject area known as corporate planning for resources. Most theoretical contributions in the area have concentrated on the availability of physical supplies. Resource planning for financial mobility has extensively drawn on this literature (e. g. LaLonde 1971, LaLonde and Robeson 1972, Taylor

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