The Research For Chinese Enterprises' Liquidity Risk Management

The research of enterprise liquidity has caused increasingly wide attention practically and theoretically. A stable and reasonable level of liquidity is the cornerstone of business' survival, and the protection of normal production and operation of enterprises. Lack of liquidity will damage the credibility of enterprises and cause the disruption of normal operation, and even lead to the financial difficulties or bankruptcy, therefore, liquidity management is of great significance for the sustainable development of enterprises. At the same time, the profitability of enterprises is achieved through liquidity, and liquidity is a source and security of efficiency of enterprises, on the other hand, the fundamental method of realizing liquidity is to improve earnings. At present, most enterprises of Chinese have not established mechanism to improve the liquidity management, such as a lack of ability to assess and recognize risk,a simple channel to access liquidity, the poor capacity resist to liquidity risk, so there is a comparatively higher liquidity risk exist in the Chinese enterprises.This article holds that the liquidity management is a comprehensive field of study. Enterprises liquidity management relates to almost every field of financial management, including funding management, investing management, working capital management, capital structure, complete budgetary control and internal control system. The paper begins with definition of asset liquidity and liquidity risk, pointing that the level of liquid assets determines the level of mobility and profitability of the enterprise: the more the mobility of corporate assets, the stronger the solvency of enterprises and the smaller possibility of occurrence of financial crisis, while the profitability of enterprises mainly rely on non-liquid assets. Debt risk due to insufficient cash flow is liquidity risk. The nature of management risk is liquidity risk caused by strategic errors in decision-making. Liquidity risk is a common concern in the enterprise's life cycle, which can only be prevented and reduced through proper management and reasonable measures and while can not be completely eliminated. This paper proposes that the object of liquidity risk management is by choosing the best strategy for working capital and establishing an appropriate overall framework of the liquidity to balance the liquidity and profitability , and ultimately to maximize enterprise value. The study of the causes leading to corporate liquidity risk needs to consider the international environment, the domestic monetary policy, industry development, enterprise operations and management concept. This paper analyzes the internal factors and external factors, pointing out that internal factors are controllable factors while external factors are uncontrollable factors, and identifying internal factors is the first step to identify assess and respond potential liquidity risk. This paper make a full analysis of the state-owned large, listed companies and small and medium-sized enterprises respectively, which is conducive to different types of enterprises to choose their own coping strategies. This paper offers a comprehensive coping strategy: firstly, the warning indicators of enterprises usually have a strong early-warning function in reflecting the trend of its financial position, so enterprises should establish warning mechanisms. Secondly, enterprises should improve their own credit, at the same time,expand financing channels to use new financial instruments. Thirdly, in addition to current assets, the enterprise should enhance the liquidity of long-term assets by realizing their exchange value. Fourthly, the establishment of a comprehensive budget system with the core of cash flow budget holds the core problem of financial control and coordination, which is the most conducive to liquidity risk management. Fifthly, preventive control of different types of risks and inner auditing are also quite important. Lastly, besides the normal financing structure, making financing plans for contingency is necessary. These coping strategies are practically helpful for improving the management level of enterprises.