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ABSTRACT

This project focused on liquidity. It manages the mental performance of a manufacturing company. The aim of this study is to help manufacturing companies to adopt every spared policy on administration of liquidity assets and closely monitor these policies for optimality. It was firmed that the inadequate current assets can jeopardize the profitability and survival of the survival of the company and firms must be in liabilities to be in business. Structured questionnaire and personal interview were used covering the aspect of the hypothesis is put forward for top management, interpreted and analyzed by using tables and average method from the certain suggestion were made not on the down find on stock, instead, they should invest on marketable securities are easily collected. Readers are hereby encouraged to study this report for details.

CHAPTER ONE

INTRODUCTION

1.1 Background to the Study 

In order to achieve profitability, the firm must maintain its liquidity; this is because failure to meet its obligation on time results in bad credit rating by short term creditors. This leads to loss of value of good will in the market which may eventually lead to poor performance of the firm (Bhavet, 2011). A firm that maintains and implements financial management policies seeks to effectively manage their liquidity levels to ensure a proper balance in their working capital components. 

Firms that maintain adequate liquidity levels are able to meet their short term obligations without affecting profitability. Padachi & Kesseven (2006), stated that the concern of business owners and managers all over the world is to devise a strategy of managing their day to day operations in order to meet their obligations as they fall due and increase profitability and shareholder’s wealth. Efficient liquidity management involves planning and controlling current assets and current liabilities in such a manner that eliminates the risk of the inability to meet due short-term obligations, on one hand, and avoids excessive investment in these assets, on the other (Padachi & Howorth, 2008).

Liquidity management is important for every organization that seeks to pay current obligations on business, the payment obligations include operating and financial expenses that are short term but maturing in the long term. To maintain their profitability, most firms manage their liquidity to meet their short term and long-term obligations which are essential in achieving profitability. Efficient management of liquidity is an integrated part of overall finance management; it contributes towards consolidation of short term solvency position. The management of the firm should generate sufficient liquid fund to ensure that their daily operating expenses are catered for. 

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