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Explain liquidity risk and relate it specifically to venture capital. Do you believe that liquidity
risk is more important or crucial in venture capital than in other types of investment? Explain.
Solution
liquidity risk is a risky situation, when a company is not able to cover its short term financial
liabilities. In other words, converting of current assets into "cash and cash equivalent " with the
loss in value of assets. Liquidity means availability of cash in hands for future needs.
Venture capital are the capital which is used to start a business with the long term growth ,
Venture capitalist faces liquidity risk when the situation of exiting from the investment invested
by the capitalist is occured. This means capitalist gets stucked with the investment and their
funds get blocked.

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Explain liquidity risk and relate it specifically to venture capital.pdf

  • 1. Explain liquidity risk and relate it specifically to venture capital. Do you believe that liquidity risk is more important or crucial in venture capital than in other types of investment? Explain. Solution liquidity risk is a risky situation, when a company is not able to cover its short term financial liabilities. In other words, converting of current assets into "cash and cash equivalent " with the loss in value of assets. Liquidity means availability of cash in hands for future needs. Venture capital are the capital which is used to start a business with the long term growth , Venture capitalist faces liquidity risk when the situation of exiting from the investment invested by the capitalist is occured. This means capitalist gets stucked with the investment and their funds get blocked.