What is the primary objective of liability management in a firm?

The primary objective of liability management in a firm is to optimize a company's capital structure. This involves analyzing and restructuring the financial obligations of a company in a way that reduces costs and risks associated with debt, while improving financial flexibility. By effectively managing liabilities, a company can ensure it has a sustainable balance between debt and equity, which is crucial for maintaining operations, funding growth, and enhancing overall financial health.

Optimizing capital structure through liability management allows a firm to potentially lower its cost of capital, maximize its valuation, and position itself advantageously in the market. This may involve refinancing existing debt, extending maturities, or managing covenants to prevent financial distress and enable the firm to capture strategic opportunities.

Other options like enhancing employee productivity, increasing market share, or broadening product lines, while important business objectives, do not directly pertain to the focus of liability management, which revolves around financial obligations and capital structure optimization.