What are factors in determining the liquidity of company which has offered its share for public subscription recently?

A large factor determining a company's short-term financial health is liquidity, the definition of which depends on context. In stock trading, liquidity is the degree to which the market is willing to buy a particular stock. As a characteristic of an asset, liquidity refers to the ease with which an asset can be converted into cash. This is the definition of liquidity we are interested in.

Let's compare two different kinds of assets: a building and a money market account. Even if these two assets are valued at $100,000 on a company's financial statement, their liquidities have different implications for the company's short-term health.

The money market account, an asset referred to as a cash equivalent, can be converted into cash within a day or two, if not immediately. The building, however, is very illiquid. For the company to get its cash, it must sell the building, which could take months, if not years.

Essentially, a company's short-term liquidity determines how well it can make its necessary payments (cash outflows) - which include employee wages, interest and supplier costs - given the revenue it generates (cash inflows). If a company has no cash equivalents, its inflows need to match or exceed cash outflows. So, if a company has a bad month and it has no supply of liquid assets like a money market account, it will be unable to make its necessary payments.

Bottom LineLiquidity is important for both individuals and companies. While a person may be rich in terms of total value of assets owned, that person may also end up in trouble if he or she is unable to convert those assets into cash. The same holds true for companies. Without cash coming in the door, they can quickly get into trouble with their creditors. Banks are important for both groups, providing financial intermediation between those who need cash and those who can offer it, thus keeping the cash flowing. An understanding of the liquidity of a company's stock within the market helps investors judge when to buy or sell shares. Finally, an understanding of a company's own liquidity helps investors avoid those that might run into trouble in the near future.

The currents Assets like Cash, Bank, securities determine the Liqudity of the company.