Liquidity

Whether money is available at the moment a supplier, lender, employee, or tax authority must be paid.

Timing Is the Test

Solvency asks whether assets and future earnings can support obligations over time. Liquidity asks whether cash can be raised now. Receivables may be valuable but arrive after payroll; inventory may be saleable but only at a discount; a credit line may exist but be unavailable after a covenant breach.

Sources of Cash

• On-hand cash: the most immediate source, subject to restrictions and currency location.
• Operating inflow: collections from customers, which depend on volume, terms, and payment behaviour.
• Committed funding: revolvers or other facilities, subject to conditions and lender capacity.
• Asset sales or new capital: potentially slower, dilutive, or destructive when markets are stressed.

Current and quick ratios summarize selected balance-sheet items. They do not show maturity dates, customer concentration, borrowing-base haircuts, trapped cash, or the price at which inventory could actually be sold.

A Real Failure Shows the Boundary

The Federal Reserve review of Silicon Valley Bank describes how interest-rate losses, concentrated deposits, and rapid withdrawals interacted. The case is not a universal template, but it shows why a reported asset value and a usable cash source can diverge when depositors demand money at once.

What to Check

Build a dated cash schedule. Include payroll, suppliers, interest, maturities, taxes, minimum capital spending, and customer collections. Then identify which party can change the timing: a lender, customer, supplier, board, or regulator. Liquidity is a network of permissions as well as a balance.

• How many days of unavoidable cash claims are covered?
• What facility can be drawn without renegotiation?
• Which asset would lose the most value if sold quickly?
• What single customer, bank, or market closure would change the schedule?

Liquidity is present only when cash can reach the obligation before the obligation becomes a default.

Inside CompanyGraph

The coverage side is observable: companies whose current, quick, and cash ratios all sit in their elevated ranges at once.