Current asset management in the enterprise

Liquidity assessment
Under the liquidity of an asset the ability to transform into cash is to be understood. The degree of liquidity depends on duration of the time period during which this transformation can be carried out. The shorter the period, the higher is the liquidity of the asset.
The liquidity of the commercial organization usually means that it has current assets in the amount theoretically sufficient to repay short-term debt even though the violation of maturity under the contract. Liquidity is quantitatively characterized by special relative indicators - liquidity ratios.
Solvency means that there is enough cash and cash equivalents in a commercial organization to accounts payable, requiring the immediate redemption. Thus, the main features of solvency are:

1. 
   Availability of sufficient funds on the account;
   
2. 
   Lack of overdue debts.
   

Liquidity and solvency are not identical to each other. Liquidity ratios can characterize the financial situation as satisfactory, but in essence this assessment may be misleading if the current assets have a significant share in the illiquid assets and overdue receivables.
Balance sheet liquidity is defined as the degree of coverage of the organization liabilities by its assets, the term of transformation to money of which matches obligations maturity.
Depending on the degree of liquidity, i.e. rate of conversion into cash, assets are divided into the several groups represented in Table 2.2.2.
Table 2.2.2. Assets structure

Assets group	2005	2006	2007	2008	2009
Group A1. Most liquid assets with a minimum term of monetization. These include: cash on hand and funds to the account, which can be used to meet current payments instantly. This group also includes the short-term investments.	6 224	7 617	26 061	12 399	1 165
Group A2. Quickly sold assets for circulation in cash takes some time. This group includes accounts receivable, payments are expected within 12 months after reporting date	17 045	52 180	56 393	82 065	72 560
Group A3. Slowly sold the assets. The least liquid assets - it's inventories, receivables, payments to be received in more than 12 months after the reporting date, the value added tax on acquired assets, and other current assets	13 296	9 017	18 096	13 847	14 069
Group A4. Illiquid assets. Assets that are intended for use in business for a long time. This group includes articles of Section I of the asset balance of "Non-current assets"	19 296	22 072	19 118	19 166	19 379

In turn, the liabilities are grouped by the term of their payment as shown on Table 2.2.3: