Open AccessCorporate liquidity in normal and crisis times: what is the best yardstick?
Author(s) -
A.B. Dorsman,
Wim Westerman
Publication year - 2021
Publication title -
central european review of economics and management
Language(s) - English
Resource type - Journals
ISSN - 2544-0365
DOI - 10.29015/cerem.927
Subject(s) - market liquidity , liquidity crisis , yardstick , business , liquidity risk , value (mathematics) , economics , multinational corporation , monetary economics , cash , finance , geometry , mathematics , machine learning , computer science
Abstract:
Aim: This paper is meant to investigate measures that help to assess corporate liquidity in both normal and crisis periods.
Design / research methods: We provide an overview of relevant liquidity measures used by both professionals and academics, apply regular liquidity measures on three major European electricity suppliers, study three local cases to find out how a recent crisis affected liquidity and provide an overview of liquidity management on 27 electricity, oil/gas and other multinational firms.
Conclusions / findings: Liquidity measures concentrate on cash ratios, working capital ratios and in specific the cash conversion cycle (CCC). It appears to matter whether a company is production driven or sales driven. In crisis times, whereas priorities do change, liquidity measures should not.
Originality / value of the article: We plead for keeping a close eye on the CCC in both good and bad times. The article provides various recommendations to academics and practitioners.