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Posted 03/31/2023 by United Real Estate Company

Different Ways to Improve Liquidity Ratio and the Related Risks

Different Ways to Improve Liquidity Ratio and the Related Risks

Liquidity is defined as the measure of the rate at which an asset is bought and sold in the market at a price that justifies its current valuation. There should be awareness among the Corporate Real Estate Firms Kuwait with each asset comes a different degree of liquidity risk.

Usually, real estate assets are known for being highly illiquid investments. Opposedly, equities are regarded as the optimal liquid investment. It is understood by an investment expert that only some particular types of properties carry the risk of liquidity with them. 

Types of Liquidity Risks Associated with Different Investment Techniques

As each liquidity risk differs in complexity, the various techniques of investing in real estate and their associated risks are mentioned below accordingly-

  • Buying and Holding Strategy

This strategy has a massive amount of risk when considering investing in property. This plan entails purchasing a rental property, looking for tenants and accumulating the money that comes with it. 

  • Crowdfunding

Crowdfunding is a form of real estate financing that is utilised by developers of real estate when they lack the capital to fund their initiatives. Money is collected by these developers from sole investors by utilising digital platforms for funding their projects. Dividends are earned by investors if the project succeeds.

Ways Utilised by Companies to Increase its Liquidity Ratio

The capacity of a company to pay down the present debts with existing assets is measured by the liquidity ratio. The liquidity ratio can be improved by organisations in multiple ways. Some of them include utilising sweep accounts, low cost, and repayment of debts. If an individual is considering growing their liquidity ratio by using these methods, then they must know that a high liquidity ratio isn’t always beneficial. Taking the services of Essential Liquidity Providers Kuwait helps companies to opt for the right way to improve their liquidity ratio.

Ending Note

To summarise, liquidity ratio can be explained as an organisation being capable enough to convert a property into a cost-effective bargain in a specified time period. The risk for liquidity regarding Corporate Real Estate Firms Kuwait happens when a high level of uncertainty and immeasurable risk is present. Several situations generate unquantifiable risk, which justifies the liquidity calculation of real estate. 

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