Liquidity Management of Agricultural Enterprises

Importance of dealing with the risk and the liquidity has been extended since the economic and financial crisis was started in 2008. We believe that the liquidity management and counterparty risk are in generally the two biggest problems of the corporate finance at present. We also know that the agricultural enterprises have greater exposure to risk than other industry of the economy. This risk exposure has serious consequences for income generation and loan repayment capacity of these enterprises. We deal with several aspects of liquidity measurement and working capital management of agricultural enterprises in our paper. An effective liquidity and working capital management can provide a strategic advantage especially in difficult economic times. We found during our researches of corporate financing that the traditional liquidity ratios do not give an accurate picture of the enterprise liquidity position, and therefore it is necessary to adjust them. The problems in the calculation of the traditional liquidity ratios are caused thereby they do not take into account the turnover ratio of the current assets and the current liabilities. An other important financial indicator closely related to liquidity is the cash conversion cycle what should also adjust in order to measure more accurately. The adjusted ratios using for the business analysis provide a more accurate picture of the current company's financial position for the stakeholders, while the traditional ratios under-or overvaluate it. Using the new ratios will support the firms' risk assessment a lot better. The ratios above mentioned were using for analysis of agricultural enterprises.