Liquidity Ratio That Prevent Lazio For Signing New Players

August 09, 2021

Lazio is currently unable to sign new players due to the liquidity ratio, what exactly is the liquidity ratio preventing the Italian capital club from bringing in new players this summer?

An economist who is also a Lazio fan, LeastSquares explained the situation via the LazioLand portal on Twitter by explaining what the liquidity ratio is and why it hinders the signing of new players.

The Italian football federation has established a system of indicators of control of the economic and financial balance for the clubs of the top three ranks of the football pyramid. Liquidity indicators, debt indicators, and labor cost indicators make up the system.

From the three indicators, only one has a substantial effect on the club, namely the liquidity indicator, which is determined from the ratio of current assets and receivables to current liabilities and payables over a 12-month period that can be paid and measures short-term commitments that can be met without creating debt.

Italian clubs are required to provide information on these liquidity indicators to the FIGC twice a year, namely, on March 31 (submission of documents due on May 31) and September 30 (submission of documents on deadline for November 30). The indicator must not be below a certain threshold set by the FIGC and failing to reach that threshold has a detrimental effect on the next transfer market.

Failing to reach that threshold forces clubs to sell players to recruit new players although there are ways to work around this. The ban on signing these players will be lifted if club managers can reach the threshold by injecting capital.

The distance required to meet the liquidity indicator threshold is reduced by one-third if the club debt or labor cost indicator is below the threshold, minus two-thirds if both indicators are below their respective thresholds.

On June 9 this summer, the FIGC lowered the liquidity indicator threshold for March 31, 2021, from 0.8 to 0.6. While it is still unknown whether the Biancoceleste indicator is at that threshold, previously in the financial report last December it was 0.6. Selling a player like Joaquin Correa this summer could save Biancoceleste from that situation and allow them to start signing new players.

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