The purpose of a liquidity analysis is to provide the business owner with an objective view of the value of his or her company. Furthermore, a liquidity analysis will help the business owner to understand the alternatives available that will permit him or her to tap into the wealth that may be trapped there.
A liquidity analysis does not necessarily assume that it is in the best interest of a company’s shareholders to sell the company. Rather, a liquidity analysis weighs both (1) the benefits of continued ownership as well as (2) the advantages of sale and reinvestment of assets in a diversified portfolio. In this way, the business owner can make the best decision.
