LIQUIDITY
12 May 2016 By PDSNETThe ability of a company (or person) to raise cash on short notice, usually with a view to meeting debts, unexpected expenses, or to take advantage of opportunities. It is wise to keep a portion of your wealth in cash so that you will be able to take advantage of unforeseen opportunities (or meet unforeseen expenses) without being forced to sell shares at a time which may not be advantageous. Excessive liquidity usually means that the company or individual is overly conservative and is not reaping the full benefit of investment opportunities. The Companies Act (71 of 2008) requires that a liquidity test be conducted and passed before a company may pay a dividend, lend money to its directors or buy back its own shares.
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