It is well known that if a company wants a very stable development, it must have a sufficient source of funds. In fact, the main reason for the bankruptcy of most companies is that their own funds cannot be circulated. Companies in many countries pay great attention to liquidity reserves in the process of their own foreign trade. There are many uncertain factors in cross-border trade. Liquidity pools can effectively avoid various risks. Many people do not understand what is. Liquidity pool? So what is a liquidity pool for everyone below?
What is a liquidity pool?
The so-called liquidity pool is the foreign trade liquidity reserve fund set up by some companies. Nowadays, many enterprises and companies will conduct transnational trade in order to seek faster development. However, transnational trade must have sufficient capital reserves, so the setting of the liquidity pool can To solve the problem of insufficient funds in some companies, the funds in the liquidity pool are also determined based on the company’s sales performance in the year. If a company’s sales performance in that year is better, the more funds in the liquidity pool will be, and multinational companies can increase investment in the process of foreign trade, but if a company’s sales performance is not very good, Then the funds in the liquidity pool will also be greatly reduced. Multinational companies must be cautious in the process of investment and trade, otherwise it will affect the stable development of the company, and may cause the company to eventually go bankrupt.
Liquidity refers to the liquidity of companies and enterprises. Liquidity is the manifestation of current assets, that is, the total amount of assets that a company or enterprise can realize or consume within one year or a production cycle that exceeds one year.
Broadly speaking, working capital refers to all the current assets of an enterprise, including cash, inventory (materials, work in progress, and finished products), accounts receivable, securities, advance payments and other items. For digital currency-related companies, cryptocurrency is also included.
Working capital is also called operating capital. In a narrow sense, working capital = current assets-current liabilities, the so-called net working capital.
The other is the capital pool, Cash Pooling, which literally means the pooling of funds together to form a space for storing funds like a reservoir. The fund pool was originally a fund management model jointly developed by the financial companies of multinational companies and international banks to uniformly allocate the group’s global funds, to uniformly allocate the group’s global funds, and to minimize the net position held by the group. The cash pool business mainly includes items such as account balance transfers of member units, day overdrafts of member companies, active disbursements and collections, entrusted loans between member companies, and separate interest calculations for deposits and borrowings from member companies to the group headquarters.
Nowadays, many large multinational companies seek a more stable development model. The liquidity pool will be set up in the process of foreign trade, and the liquidity pool can also help some companies solve some urgent needs.