Liquidity Management of Neyveli Lignite corporation Limited - Empirical Study

Abstract

Current assets management that affects a firm’s liquidity is yet another important finance function, in addition to the management of long-term assets. Current assets should be managed efficiently for safeguarding the firm against the dangers of liquidity and insolvency. Investment in current  assets affects the firm’s profitability, liquidity and risk. A conflict exists between profitability and liquidity which managing current assets. If the firm does not invest sufficient funds in currents, it may become illiquid. But it would lose profitability as idle current assets would not earn  anything. Thus, a proper trade-off must be achieved between profitability and liquidity. Each and every company has to estimate needs for current assets and make sure that funds would be made available when needed. It would thus be clear that financial decisions directly influence production,  marketing and other functions of the firm. This, in consequence, finance functions may affect the size, growth, profitability and risk of the firm, and ultimate, the value of the firm.