Summary Firms need flexibility, defined as the capacity to react to unexpected situations. Corporate flexibility improves with liquidity. For non-financial firms, sources of liquidity are twofold: internal, by keeping cash, and external, through a borrowing power, usually from banks. On the...

Firms need flexibility, defined as the capacity to react to unexpected situations. Corporate flexibility improves with liquidity. For non-financial firms, sources of liquidity are twofold: internal, by keeping cash, and external, through a borrowing power, usually from banks. On the average, a...