What is liquidity gap in SAP FS-LRM - Liquidity and Risk Management?

SAP Term: liquidity gap

• Component: FS-LRM

• Component Name: Liquidity and Risk Management

• Description: The difference between assets and liabilities.

Smart SAP Assistant

• Key Concepts: 
  Liquidity gap is a term used in SAP FS-LRM Liquidity and Risk Management to describe the difference between the amount of cash available to a company and the amount of cash needed to meet its obligations. It is calculated by subtracting the company's current assets from its current liabilities. A positive liquidity gap indicates that the company has more cash than it needs, while a negative liquidity gap indicates that the company does not have enough cash to meet its obligations.
  
  How to use it: 
  In SAP FS-LRM Liquidity and Risk Management, liquidity gap can be used to measure a company's financial health. It can be used to identify potential risks and opportunities, as well as to assess the company's ability to meet its short-term obligations. The liquidity gap can also be used to compare a company's performance with that of its competitors.
  
  Tips & Tricks: 
  When calculating the liquidity gap, it is important to consider both current assets and current liabilities. It is also important to consider any potential changes in the company's financial situation, such as changes in interest rates or changes in the market value of assets.
  
  Related Information: 
  The liquidity gap is closely related to other financial metrics, such as cash flow, working capital, and debt-to-equity ratio. It is also related to risk management strategies, such as hedging and diversification.