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To understand this subject, first you must note the definition of liquidity. Liquidity refers to the amount of cash on hand. How liquid an entity may be, or their liquidity, is based on how much of their assets are easily obtainable or convertible into cash. So liquid assets can include actual cash, checking or savings accounts, money market accounts, a paycheck (convertible into cash by depositing or "cashing"), etc.
The problem with liquid assets is that they don't do anything useful other than satisfy immediate needs and wants without the necessity of leveraging debt (credit). While you should definitely have at least some cash on hand for emergencies and daily operating costs/expenses, assets are much more effective and useful when they are working for you. For instance, is it better to have $500 in your savings account that earns an APR of 0.8% or would you prefer to put that same $500 into a high-percentage-yield mutual fund that earns on average 2.6% per year? The latter is an example of your money working for you by bringing in a higher rate of investment (ROI).
Healthy businesses perform best when they leverage their cash and debt assets and liabilities to ensure the highest ROI possible. Your money needs to always make you more money (increase your bottom line profitability).
Another reason it isn't a great idea to be too liquid is because liquid assets are not as protected as other types of assets. Cash is too easy to access and therefore quite easy to find, mismanage, misappropriate, steal or be won in a lawsuit. There are a lot more protections available for other types of assets if these are "hidden" in the proper legal structures.
What else can I help you with?
Could having too much money be a bad thing?
well yes and no its good to have money to save so you can spend later but too much money can breed greed
Why was it a good idea to have a national bank?
no it wasn't because it gave too much power to the federal government (my opinion)
Why do banks need to manage liquidity risk?
Because there is no telling how many customers would want to withdraw their money from their bank accounts on any given day. Banks use the deposit money to lend loans and makes a profit. If they lend too many loans, they may not have money to meet withdrawal demands. So banks have to maintain their liquidity position in a strong way.
How do people go bankrupt?
They spend too much money and don't invest good. It is also possible to have a lot of money taken from them.
Too much money chasing too few goods?
whats caused by too much money chasing too few goods?
Why is to much liquidity not good thing?
Liquidity is itself a good thing but too much of everything is not good same goes with too much liquidity as it is known fact that money has it's opportunity cost and if company has too much liquidity cash available without any use for the specific time period, that portion of money is loosing opportunity earn interest on that amount for that specific period of time or may be that money can be utilized for more profitable investing opportunities. That's why it is the responsibility of financial manager to determine the optimal working capital requirement so that remaining amount could be spend on other areas. Optimal capital means nor too much liquidity neither shortage of liquidity as both are bad for business.
When was Too Much of a Good Thing created?
Too Much of a Good Thing was created on 2004-06-21.
Why is too much of a good food a bad thing?
Too much of anything can harm you.
What can one never have too much of according to the famous saying?
"You can never have too much of a good thing", maybe?
Who wrote the quote too much of a good thing is a bad thing?
Expand the quote Too much of anything is good for nothing?
When is too much of a good thing too much?
when you start to crave it and when you can't live without it
What does the saying you can have too much of a good thing mean?
The saying 'you can have too much of a good thing' means that something pleasant may become unpleasant in the long-run.
Famous sayings one can never have too much what?
One can never have too much of a good thing.
Too much of anything is good for nothing -expand?
Too much of a single "thing" diminishes its value.
Why will your body have problems if you get too much or too little of a hormones?
Because ur getting to much of a good thing
Is having a good thing?
Yes, but having too much can be bad.
What are the release dates for Flipping Out - 2007 Too Much of a Good Thing 4-6?
Flipping Out - 2007 Too Much of a Good Thing 4-6 was released on: USA: 14 September 2010
