How can I use my annual financial statement to improve my liquidity?
February 28, 2022 | 40,00 EUR | answered by Fanni Ehrig
Dear tax consultant,
My name is Renata Fischer and I run a medium-sized retail company. In recent years, I have noticed that my liquidity is becoming increasingly problematic. Despite good sales, I often struggle to cover my operating costs and pay my employees their salaries on time.
Upon reviewing my annual financial statements, I noticed that while my equity is stable, my current assets have deteriorated. I wonder if there are ways to strategically use my annual financial statements to improve my liquidity. Are there measures I can take to optimize my short-term financing and ensure my solvency?
I am concerned that my accumulated liabilities and poor liquidity situation could threaten my company in the long term. Therefore, I am looking for concrete solutions that will help me stabilize my financial situation and lead my company to long-term success.
Can you provide me with specific tips and recommendations on how to use my annual financial statements to improve my liquidity? Are there specific key figures or analyses that I should pay particular attention to? What measures can I take to optimize my short-term financing and ensure my solvency?
Thank you in advance for your support and expertise.
Sincerely,
Renata Fischer
Dear Mrs. Fischer,
Thank you for your inquiry regarding your liquidity problems and the use of your annual financial statements to improve your financial situation. It is important that you take measures early on to ensure your solvency and to lead your company to long-term success.
First of all, it is positive to hear that your equity is stable. This can be seen as a solid foundation for your company. However, current assets also play a crucial role in a company's liquidity. If this has deteriorated, it can lead to shortages, as you have already noticed.
To use your annual financial statements strategically to improve your liquidity, you should first get an overview of your financial situation. Analyze your current financial statements and particularly examine the development of your current assets, liabilities, and cash flows.
An important ratio to watch is the Working Capital Ratio. This ratio provides insight into whether your company has enough liquid assets to settle short-term liabilities. A low value may indicate that your current assets are not sufficient to cover your current liabilities.
To optimize your short-term financing and ensure your solvency, there are various measures you can take. Firstly, you could try to collect your receivables faster to have more liquid assets available. Also, review your inventory levels and try to reduce them to release capital.
Furthermore, you could consider taking out short-term loans or extending payment terms agreed with suppliers to improve your liquidity. It is important to create a detailed financial plan and regularly review it to detect shortages early and respond accordingly.
I hope these tips and recommendations help you stabilize your financial situation and lead your company to long-term success. If you have any further questions or need assistance, I am happy to help.
Best regards,
Fanni Ehrig
