Failing to manage liquidity effectively can lead to several risks:
Insolvency: Inability to meet short-term obligations can lead to insolvency and potentially bankruptcy. Operational Disruptions: Poor liquidity can result in the inability to purchase necessary supplies or pay employees, disrupting operations. Loss of Creditworthiness: Low liquidity can damage a company's credit rating, making it harder to obtain financing in the future. Missed Opportunities: Lack of liquid assets can prevent a business from taking advantage of investment opportunities.