Liquidability

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Into cash (from Latin liquidate dare , "liquidate") is in the business the ability assets in cash to convert.

General

The verb "liquidate" appeared for the first time in 1501 in the meaning of "dissolve, execute". Around 1600 it was given the content "to draw up an invoice" in merchant language, which is still used today by doctors as a private liquidation . The term liquidation, on the other hand, is used today only for the winding up of companies and no longer for the execution of people.

Accounting

An asset is the more liquid, the faster it can be converted into cash without significant depreciation (liquidation time). Liquidability relates to the proximity of an asset to money, so that it can be converted into money with as little loss as possible through sale or lending .

The balance sheet of non-banks contains on the assets side in accordance with Section 266 (2) HGB the assets classified according to their liquidity. The balance sheet items are arranged according to decreasing capital commitment period , i.e. with increasing liquidity. Fixed assets are the most difficult to liquidate (such as land or technical systems and machines in Section 266 (2) lit.AI and A II HGB), the easiest to liquidate are cash on hand (cash is already the highest level of liquidity) or bank balances from Section 266 ( 2) . 2 lit. B IV HGB. The opposite is the case with bank balance sheets that follow the classification scheme prescribed in Section 2 RechKredV and are based on the principle of liquidity on the assets side, so that assets begin with the most liquid balance sheet items such as cash reserves and cash on hand.

Liquidity in real estate funds

During the 2007 financial crisis , open-ended real estate funds fell victim to the fact that they could be liquidated at any time. They faced more redemption requests ( sell orders ) than they could service from their liquidity reserve, so they had to suspend redemption until 2011. Today, section 98 of the KAGB provides that each investor must be paid out his real estate shares in the investment fund a maximum of twice a month and that the capital management company may suspend the redemption of the shares if there are exceptional circumstances that require a suspension taking into account the interests of the Make investors appear necessary. It should be noted that unit returns in real estate investment funds are only possible after a minimum holding period of 24 months has elapsed; unit returns must be declared to the investment company with an irrevocable return declaration subject to a return period of 12 months; the deadline for suspension of redemptions in the event of a lack of liquidity in the fund is 36 months. If this period is insufficient, the investment company's right to manage the fund expires ( Section 255 KAGB, Section 257 KAGB).

economic aspects

The liquidity consists of three aspects of solvency , the liquidity reserve and into cash. The solvency is guaranteed if the debtor can always meet its payment obligations in full. Any asset - including unused loan commitments - fulfills the function of a liquidity reserve ( cash and cash equivalents ) if it can be liquidated at short notice and leads to additional income ; Liquidity is a property of liquidity reserves. In the case of liquidity, the length of the liquidation period must be taken into account. Liquidability requires functioning markets with high market liquidity . The higher the transaction and information costs , the worse the liquidity becomes.

An emergency sale takes place under time pressure , so that the required liquidation period can usually not be achieved and therefore impairments are to be expected which would not have occurred if the liquidation period had been sufficient.

See also

Individual evidence

  1. ↑ Gerhard Köbler , Etymological Legal Dictionary , 1995, p. 254
  2. ^ Wilhelm Braune / Hermann Paul / Eduard Sievers, Contributions to the History of German Language and Literature , Volumes 96–98, 1976, p. 231
  3. ↑ Rainer Bonn, Financial plan-based measurement and control of the liquidity risk , in: Reinhold Hölscher (Ed.), Finanzmanagement, Volume 10, 2006, p. 30
  4. ↑ Thomas Hutzschenreuter, General Business Administration , 2009, p. 332
  5. ↑ Edmund Heinen, The company's target system , 1966, p. 75
  6. ↑ Edmund Heinen , The company's target system , 1966, p. 76
  7. ↑ Hans-Hermann Francke / Heinz Rehkugler (eds.), Real Estate Markets and Real Estate Valuation , 2012, p. 406