one- page summary of the article : “Analyzing liquidity using the cash conversion cycle” Corey S. Cagle, Sharon N. Campbell and Keith T. Jones – This article can be found in the Journal of Accountancy...

Analyzing liquidity using the cash conversion cycle
It is very necessary to assess liquidity of the company because decline in liquidity increases the
risk of bankruptcy. Liquidity is described by Financial Accounting Standard Board as showing
an asset’s or liability’s nearness to cash. In loan agreements, there is a clause about maintenance
of minimum liquidity that should be maintained by borrowers. The increasing importance of risk
assessment within the companies, public accounting practitioners performing such engagements
as well as internal auditors could also take advantage from trusted measures of liquidity in
assisting management to better understand vulnerabilities.
In assessment of company’s liquidity, the most widely used method is the current ratio and...