Maturity mismatch

Maturity mismatch,

Definition of Maturity mismatch:

  1. The term maturity mismatch commonly alludes to situations involving a company's balance sheet. A firm cannot meet its financial obligations if its short-term liabilities outweigh its short-term assets. Mismatches also occur when there are far more short-term assets compared to its mid- and long-term assets. Maturity mismatches can shed light on a firm's liquidity, as they show how it organizes the maturity of its assets and liabilities. They can also signify that the company is not using its assets efficiently, which could give rise to a squeeze in liquidity.

  2. The term maturity mismatch can refer to situations when there's a disconnect between a company's short-term assets and its short-term liabilities. In short, the mismatch happens when there are more liabilities than assets. Maturity mismatches can also take place when a hedging instrument and the underlying asset's maturities are misaligned. As such, a maturity mismatch may also be referred to as an asset-liability mismatch.

  3. Occurs when a business mismatches its balance sheet by having more short term liabilities than it has short term assets, as well as possessing more assets than it has liabilities for medium and long term obligations. Changes in the maturity profile of a company can also indicate its ability to borrow.

How to use Maturity mismatch in a sentence?

  1. Maturity mismatches often signify a company's inefficient use of its assets.
  2. Maturity mismatches are visible on a company's balance sheet and can shed light on its liquidity.
  3. Maturity mismatch can refer to situations where a firm's short term liabilities are more than its short term assets.
  4. When a hedging instrument and the underlying asset's maturities are misaligned, maturity mismatches can also occur.

Meaning of Maturity mismatch & Maturity mismatch Definition