Liquidity Measurement Problems in Mining Companies

Abstract

The ability to manage liquidity is important in any economic conditions. It assumes unique importance during a downturn and depends on management having reliable information on the company’s liquidity level. Static liquidity ratios do not provide such reliableinformation. Their high values result from high inventory levels of extracted raw materials and is not tantamount to excess liquidity.Additional information is offered by the cash cycle and its constituents – Days Inventory Outstanding, Accounts Receivable Days andAccounts Payable Days. Long cash cycles signal a shorter deferral of settlement of suppliers’ bills and a lower liquidity level. To maintain liquidity, companies must maintain higher cash balances in their accounts. Short cycles, on the other hand, may result from latepayment of invoices, which is reflected in long Accounts Payable Days. Some coal companies have very long Accounts Payable Daysand negative cash conversion cycles. This means that some of their non-current assets are financed out of current liabilities.

Genetic Algorithm for Optimal Vendor Payment Schedule of Transportation Company

“…The formula is applied to calculate NPV is as follow: (2) where 𝑅 ! denotes the net cash flow of activity, 𝑖 is the interest rate at 𝑡 period.…”

“…Working capital such as money in, money out and administration of inventory is crucial as a company needs to maintain sufficient cash flow to meet its short-term operating costs and obligations. Working capital management is considered fundamental for the financial performance of a company, as it embodies the connection between liquidity and profitability [1,2,3]. There are numerous ways to free up working capital such as accounts receivable, accounts payable, cash management and inventory [4,5].…”