What is liquidity effect in SAP FIN-FSCM-TRM-TM - Transaction Manager?

SAP Term: liquidity effect

• Component: FIN-FSCM-TRM-TM

• Component Name: Transaction Manager

• Description: An effect that arises when forward exchange transactions are rolled over on the basis of the old forward exchange rate for the value date of the original transaction, which then differs from the forward exchange rate for the rollover date. If the original transaction is closed out on the basis of the old rate, the exchange rate difference must be taken into consideration for the rollover. This results in a liquidity shift that affects net income, where the difference amount for the duration of the rollover has to be borrowed or invested on the market.

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• Key Concepts: 
  The liquidity effect is a concept in SAP Transaction Manager (FIN-FSCM-TRM-TM) that describes the ability of a company to pay its short-term obligations. It is calculated by taking into account the company's current assets, such as cash, accounts receivable, and inventory, and subtracting its current liabilities, such as accounts payable and short-term debt. The result is the company's liquidity ratio, which is used to measure its ability to meet its short-term obligations. 
  
  How to use it: 
  The liquidity effect can be used to assess a company's financial health and determine whether it has sufficient resources to meet its short-term obligations. It can also be used to compare the liquidity of different companies in the same industry. To calculate the liquidity effect, a company must first identify its current assets and liabilities. Then, it must subtract the liabilities from the assets to calculate the liquidity ratio. 
  
  Tips & Tricks: 
  When calculating the liquidity effect, it is important to remember that not all assets are liquid. For example, fixed assets such as buildings and equipment are not considered liquid assets and should not be included in the calculation. Additionally, it is important to consider any potential changes in the company's financial situation that could affect its ability to meet its short-term obligations. 
  
  Related Information: 
  The liquidity effect is closely related to other financial concepts such as cash flow and working capital. Cash flow is a measure of a company's ability to generate cash from its operations, while working capital is a measure of a company's ability to finance its operations with current assets. Both of these concepts are important for assessing a company's financial health and should be considered when calculating the liquidity effect.