Corporate liquidity in normal and crisis times: what is the best yardstick? Cover Image

Corporate liquidity in normal and crisis times: what is the best yardstick?
Corporate liquidity in normal and crisis times: what is the best yardstick?

Author(s): André Bastiaan DORSMAN, Wim WESTERMAN
Subject(s): Business Economy / Management, Energy and Environmental Studies, Environmental and Energy policy, International relations/trade, Financial Markets, Accounting - Business Administration
Published by: Wyższa Szkoła Bankowa we Wrocławiu
Keywords: cash; working capital; cash conversion cycle; crisis; liquidity measures;

Summary/Abstract: Aim: This paper is meant to investigate measures that help to assess corporate liquidity in both normal and crisis periods, to find out what matters on corporate liquidity in crisis times. 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 the recent COVID-19 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). In crisis times, whereas priorities do change, liquidity measures should not. In the COVID-19 crisis, firms go for leaner operations, as well as financing adjustments when needed. 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.

  • Issue Year: 5/2021
  • Issue No: 4
  • Page Range: 9-32
  • Page Count: 24
  • Language: English