Critically Evaluate why the Liquidity of a Firm is Considered Crucial Essay

Critically Evaluate why the Liquidity of a Firm is Considered Crucial Especially in the Growth Stage of a Companys Development - Essay ExampleCurrent paper focuses on a particular aspect of organizational performance liquid, a term used in order to show the potentials of an organization to meet its liabilities. Emphasis is given on the significance of liquidity in the process stage of the company development. At the aforementioned(prenominal) time, efforts atomic number 18 made in order to identify the terms to a lower place which the changes in the financial statement of a particular organization can catch the organizations value creation process. The literature published in regard to these issues has been reviewed and evaluated it is made clear that the role of liquidity in the growth stage of the company development can be differentiated. As of the changes on a firms financial statements, these seem as unavoidable especially under the following terms the value creation proce ss of each organization is based on specific organizational selective information changes on the particular data could influence the validity of the assumptions made in regard to the economic status of the organization and its power within its industry. 2. Liquidity and company development - Why the liquidity of a firm is considered crucial especially in the growth stage of a companys development In order to understand the role of liquidity in the growth stage of a company development, it would be unavoidable to refer to the activities in which a company has to be involved during the specific phase. In compliance with Schmeisser, Clausen and Popp (2011), during its growth phase, a firm has to develop its activities covering the relevant costs at this point, the following problem appears the development of a company in its growth phase may be delayed due to a series of factors that cannot be easily controlled, such as the lack of capability of employees, failures in the communion of the organization with its customers or suppliers and so on (Schmeisser, Clausen and Popp, 2011). During the above period, the cash required for the completion of the firms projects can be increased while the bread achieved may be low, especially in the initial period of the firms growth. Therefore, the liquidity of the organization during the specific period may be low. In a different case, i.e. in case that the liquidity of the organization in its growth phase is high, it can be assumed that the prospects for the organization, in terms of its performance, are quite positive. Kapil (2011) notes that the level of liquidity of each organization should be periodically checked in order to ensure the status of the organization within its market. It is explained that for in advance(p) firms, liquidity reflects their ability to achieve their targets, no matter if they refer to the short or the long term. In the context of the above role, liquidity is described as an indicator of the i nvestments and assets of a firm that can be quickly converted to cash at any time or within one course of study (Kapil 2011, p.6). In the study of Arnold (2008) reference is made to the liquidity risk, which is described as the condition in which the organization is not able to retrieve the cash necessary for covering its liabilities. Moreover, Singla (2007) notes that in the growth sta