“Liquidity risk management – A key performance indicator in services industry”.

Referring to financial constrains in Small and Medium Size Enterprises (SMEs), liquidity management issue remains essential to their solvency and growth potentiality, especially in services industry. Being that these enterprises constitute the most representative segment of the Albanian economy, the creation and maintenance of a "vertebral column" stable and structured regarding business is a step toward the establishment of the basic skeleton for a sustainable economy. Firstly, the ROC Curve analysis was used to identify the discriminative variables pertaining to a panel of 60 SME’s with a default ratio of 50% referring to the 2013-2014 period. Then, by using the fix effect linear regression and avoiding the multicollinearity issues between the above mentioned performance determinants it was noted that the most discriminative variables on SME’s performing status are: return on assets, total assets and long term assets to shareholder’s equity. It also demonstrates that SMEs liquidity management is positively correlated with long term assets turnover and interest coverage ratios and the contrary occurs with working capital and payable accounts ratios. This leads to the understanding that SMEs by investing in long term assets generate sales growth which in a vicious circle generates cash-flow and a comfortable liquidity level. From the other side a low level of interest expenses help the SMEs liquidity performance which contemporary serves as a green light for banking products policy development and related benefits.