How can I create corporate finance
How can liquid funds be invested profitably?
That's right: you can't have too much money. But you can distribute your money the wrong way - then it will lose value instead of growing. This happens to some companies that have increased their liquidity buffers. Undoubtedly a sensible undertaking after the experience from the financial crisis of 2007/2008, when a lack of liquidity caused many companies to face massive difficulties. However, one can do too much of a good thing. If you look at the liquidity of many companies, you will see that this liquid is often superfluous.
German companies are well aware of how abundant they are with liquidity. This is confirmed by a survey by LBBW Research, which inquired about loan requirements. “No need,” says half of those surveyed, thanks to the ample liquidity cushion. 7 percent even expressly want to reduce liquidity first.
A good thought, a right one. Because current accounts, overnight and fixed-term deposits hardly generate any returns - and what little is eaten up by inflation. If you leave your money lying around, you watch it fall in value. Even in these times of low interest rates, there are definitely lucrative investment opportunities that generate returns.
How much liquidity is optimal?
Before the money can be invested, entrepreneurs and managers need to answer two important questions. The first: What is the optimal liquidity for my company? How much liquidity makes sense? Shows the way to the answer. in this topic special. The second question: are we talking about operational or strategic liquidity?
“Operational liquidity” means: If I need the money right away, will I get it right away? Because of this short-term nature, only sight deposits and time deposits come into question. It looks more flexible with the strategic liquidity, and that broadens the spectrum of possibilities. Suddenly stocks and currencies are just as much an option as bonds and commodities, money market funds and, last but not least, derivatives. Experience has shown that it helps companies to work out various options in scenarios with their financial partner in order to determine the best possible approach.
"Weaving" on the performance carpet
The aim is always to achieve an optimized portfolio through diversification. That is why the various asset classes are weighted differently - and readjustments are made as soon as the situation changes.
This creates a “performance carpet” over the years, the pattern of which changes constantly - depending on how strongly the individual asset classes are represented. According to the study “Liquidity in a low interest rate environment” by LBBW Research, it is worthwhile to invest in suitable investment instruments “in order not only to be able to achieve a higher return, but also to reduce the risk at the same time”.
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