Final answer:
Liquidity refers to how easily one can exchange money or financial assets for a good or service. Liquidity management involves strategies that organizations use to ensure they have enough liquid assets to meet their short-term financial obligations. Liquidity is important for nonprofit finance and management because it ensures that organizations have the necessary funds to cover day-to-day expenses and fulfill their mission.
Step-by-step explanation:
Liquidity refers to how easily one can exchange money or financial assets for a good or service. Liquidity management involves strategies that organizations use to ensure they have enough liquid assets to meet their short-term financial obligations. Liquidity is important for nonprofit finance and management because it ensures that organizations have the necessary funds to cover day-to-day expenses and fulfill their mission.
Nonprofit organizations often rely on donations and grants, which can be uncertain and fluctuate over time. Having strong liquidity management practices allows nonprofits to navigate through uncertain financial periods and maintain stability. It also provides them with the flexibility to seize opportunities for growth and innovation.