| Government monetary policy:Affects interest rates in particular, i.e., the cost of capital, which determines the availability of debt financing. An expansionary monetary policy of lowering interest rates to stimulate the economy has a positive effect on the level of liquidity by reducing the cost of capital, in contrast to a restrictive monetary policy, which consists primarily of raising interest rates (Begg, Fischer & Dornbusch, 2003).State fiscal policy:A stabilised and transparent tax system in the state, both with regard to income taxes and those levied on sales revenue, has a beneficial effect on the liquidity of companies. A stable legal situation makes it possible to plan in advance and with great accuracy the entity's expenses related to the payment of compulsory benefits, using readily available historical data (Begg et al., 2003).Economic climate:Influences the demand and supply of offered products or services, and consequently – their price. The price of a commodity is very important from the point of view of a liquidity strategy. The entity calculates the required and achievable level of margin based on market data and is thus able to determine in advance the amount of estimated profit and capital surplus that it can realistically generate. As a general rule, most companies achieve better liquidity results during good economic times, when there is confidence in the market that results in effective cooperation with counterparties.The characteristics and degree of development of the domestic market:This is related to both the cost of labour and the amount of compulsory employee benefits, as well as the cost and the number of different opportunities to obtain both long-term and short-term financing. Lower costs and a wider range of financing options have a positive impact on the development of cash surplus. |
The degree of development of the industry and level of risk:In emerging industries, especially those important for the development of the country, it is relatively easier to obtain financing or tax exemptions to reduce operating costs altogether, but the dynamic development of new sectors may involve a higher risk of operating and achieving the anticipated sales result due to rapidly emerging competition. However, it is the growing industries that are in a more favourable liquidity position than the developed industries, as they are characterised by increasing demand for the products and services offered.Growth prospects and industry specifics:Planned volumes and periods of increased and decreased cash flows are very important when managing cash surpluses and shortfalls in a company. This is a particularly important aspect in industries that are characterised by high seasonality of sales. |
The company's market position and pricing strategy:A strong competitive position allows for more flexible adjustment of the payment terms of receivables. The size of the entity may allow it to benefit from economies of scale, which reduce production costs and increase the company's margins, having a positive impact on liquidity. The company's pricing strategy responds to market opportunities and the situation currently prevailing in the economy.Inventory policy:Determines the amount of capital permanently frozen in the enterprise. The more stocks the company holds, the less free cash is available for unforeseen expenses. The amount of inventory held is specific to the company and the management model adopted.Implementation of investment projects:Involves a temporary reduction in liquidity for the sake of obtaining future economic benefits. Prudent planning from the point of view of liquidity is particularly important in situations of long-term investment, where the capital expenditure (CAPEX) is high for the entire duration of the project. Then the entity should be particularly mindful of how it will cover future necessary expenses and whether this will jeopardise the company's smooth cash flow in the long term.Change in debt:Can be related to borrowing or repayment of credit. Many times, the use of overdraft lines of credit is an important part of liquidity management. Financing investments with debt capital is also generally associated with a lower cost than financing with equity alone.The entity's exposure to international markets:In entities operating in foreign markets, the entity's liquidity is also affected by exchange rate risk. In the absence of a responsible foreign exchange risk management policy, the amounts received from product sales may suddenly prove insufficient to cover liabilities. This makes liquidity planning more complex, but also essential for the stable operation of the entity. |
| 31 dic 2022