how do you measure liquidity in a private limited company...?

Question

....i only know how to measure liquidity in a public limited company, please help!

Thx
Dom

Answer 1

The company would have an appointed liquidator who decides the liquidity.

The liquidity is a measure of the ease with which an asset can be converted to cash without the loss of principal, the proportion of cash or cash equivalents in a company's assets.

Private company limited by guarantee:

A Private Limited liability company is similar to a corporation and a limited liability partnership. These companies do not have share capital but are guaranteed by its "members", who agree to pay a fixed amount in the event of the company's liquidation.

In the event of a company’s liquidation, an official will be appointed to oversee the breakup of the company for distribution amongst its creditors.

The person appointed to deal with the assets and liabilities of the company or partnership once the resolution to wind up has been passed or a compulsory winding up order has been made.

Answer 2

by following these test u can measure liquidity of a private company

1) if balance sheet available, compute quick ratio

quick ratio = (current assets - inventory) / current liabilities

cash ratio = (cash + bank + marketable securities) / current liabilities

quick ratio should be more than 1
cash ratio must be more than .75 or near to 1.

2) some time year end results shows good position in private company, but reality me be otherwise. therefore u should analyse the cash flow statement of the company.
if it shows that cash have been moved properly in the business then its okay.
but if some transaction are at year end which has increased cash balance suddenly, will show better liquidity, but in real they does not represent liquidity. after the year end balance sheet the same fund may be returned/used for other purposes.

these types of transaction are faked transaction generally made in private company.

3) check the cash and bank balance at the end of every month, which will show their real liquidity.

4) check their debtors turnover ratio
= sales during the year / debtors balance

it depends on industry to industry, but around 5 is a good ratio.
if it is too low then it means, company is not able to get fund from its debtors on time having an adverse effect on liquidity.

Answer 3

There is no difference between liquidity of a PLC and private company. Liquidity is the ratio of current assets over current liabilities. From current assets, you ignore assets that are not likely to be realised in the time framework of your review.

hth

Answer 4

Take the total dollar value of cash and marketable securities divided by current liabilities. That's called the liquidity ratio.

Answer 5

C. not one of the above!!! company Welfare tells agencies that they are in a position to do regardless of dumb crap they choose, and their status as "too large to fail" gets them a bailout, effect-loose. you elect to work out some reducing? start up with Social protection and Medicare. The duffers on the dole those days KNEW that the device wasn't gonna be conceivable if left to the investment kind of pay-as-you-bypass back interior the Eighteen Eighties or in the previous, yet they stored quiet and elected extra of the comparable idiots. (Like Reagan!!! The ideal deity of the GOP wrought untold harm. low value expenditures and private loan bailout? you think of that that comes without the deregulation that introduced approximately a industry failure because of the speculative nature of ways they ran issues?? Bush Jr., comparable situation. Housing advance/bust got here about on his watch. he's merely as lots to blame because of the fact the Dems who pushed for comfortable standards that introduced approximately the housing advance/bust.) Then, upload to the forged with taxes that come back to sane. If the whiny CEOs choose larger bonuses, be extra effective AT business enterprise!!!! Any agencies attempt and %. up and run to three tax-look after banana republic? there's a tariff for that.

Answer 6

Try this, and search for others like it. They should help.

http://www.teachnet-lab.org/london/dsalbstein/balance/concepts.htm