Accounting Knowledge: Liquidity Series

What is liquidity?

We talk about liquidity (Liquidity), which has three uses or meanings. One is the liquidity of the whole macroeconomy, which refers to the amount of money invested in the economic system. Now, the so-called excess liquidity means excessive amount of money, and these excess funds need to find a way out for investment, so there is an investment / economic overheating and inflation risk. The root cause of the current excess liquidity comes from China's constantly rising trade surplus, and exporters continuously convert the US dollars back to the country, so the state must continue to invest RMB in the economic system, which results in the phenomenon of excess liquidity.

In the stock market, we refer to liquidity as the whole market, referring to the participation of trading funds relative to stock supply. How many? The funds include field funds, that is, the funds that have been purchased from the stock market, that is, the total market value of circulation, as well as off the market funds, that is, funds ready to be admitted at any time in stock accounts. If the stock supply remains unchanged, or the growth rate of trading funds is faster than the growth rate of stock supply, even if the company's profits remain unchanged, it will lead to the rise in stock prices. Vice versa, this is a very simple demand supply relationship, but this stock price rise is limited. If the stock price is too high or too much, the stock price will go up too much without the support of performance, which will last forever. This kind of capital is the hot money we often say.

The above two types of liquidity will be linked in most cases, which will lead to excess liquidity in the stock market. flow Excessive sex, so when the country begins to tighten its monetary policy, the stock market will lose its capital supply and perform poorly.

For stocks, liquidity is another concept, which means the difficulty of buying and selling stocks. That is to say, if I buy this stock, it is easy to sell. We often say that this stock is poor in liquidity, that is, it is difficult to sell at ideal price, so the stocks with bad liquidity are mostly small cap stocks or highly controlled stocks, which are not suitable for large capital operation. Even after buying, the share price has gone up, but they can not be sold, and the risk of large capital is even greater. So they are more willing to operate in large liquidity stocks, where active trading, and a large number of transactions will not cause significant changes in stock prices. However, small and medium-sized investors are much more free. Because of the small amount of funds, there are many choices.

In addition, in the accounting field, the utilization rate of working capital in the business process, i.e. the efficiency of running the operation, is usually below the ratio. Calculation Reflect:

1. Current ratio = current assets and current liabilities.

2. Quick ratio = (liquid assets inventory). Current liabilities.

3, cash ratio = cash flow liabilities

Liquidity refers to the difficulty of a commodity transaction being turned into cash.

The liquidity of macroeconomy refers to the amount of money invested in the economic system. Excess liquidity means excessive amount of money, which is manifested by overheating or inflation.

The liquidity of the stock market refers to the amount of funds involved in the transaction relative to the stock supply. The funds include field funds, including those that have purchased stocks, including off the field funds, and funds ready to be admitted at any time in stock accounts. If the funds are greater than the stock supply, the stock market is characterized by liquidity.

The liquidity of stocks refers to the difficulty of stock trading activities, that is to say, it is easy to sell after buying this stock, and if it is hard to sell, the stock liquidity is very poor.

The liquidity of financial accounting refers to the ability of an enterprise to bear all kinds of short-term liability for repayment. It depends on the structure of the balance sheet, that is, the nature, composition and financing method of the assets of the enterprise.

Cash, a narrow sense of cash, refers to the cash in cash of an enterprise. In general, cash refers to cash in addition to cash and other certificates of cash that conform to the definition of cash.

Cash equivalents refer to short term investments with short duration, high liquidity (liquidity), easy conversion to known amount of cash and small risk of change in value. Although cash equivalents are not cash, their ability to pay is not much different from cash, which can be regarded as cash.