Maturity Gap Calculator
This tool calculates the Maturity Gap for a specific time period. The Maturity Gap is the difference between the total value of assets maturing and the total value of liabilities maturing within that same period. It's a key metric in liquidity risk management.
Enter the total value of assets and liabilities that will mature within the specific period you are analyzing (e.g., the next 30 days, the next year). Ensure consistent units (e.g., dollars, euros, etc.).
Enter Maturing Values for the Period
Understanding the Maturity Gap
What is the Maturity Gap?
The Maturity Gap is a simple, yet fundamental, measure used in financial institutions (like banks) and corporate treasury departments to assess liquidity risk. It represents the net difference between assets and liabilities expected to mature or become due within a specific future time bucket.
Calculation: Maturity Gap = Assets Maturing - Liabilities Maturing
This calculation is typically performed for a series of time periods (e.g., 0-30 days, 31-90 days, 91-180 days, 181 days - 1 year, > 1 year) to get a full picture of an entity's liquidity profile across different horizons. This tool focuses on a single, user-defined period for simplicity.
Why is it Important?
A positive gap in a time bucket means that more cash is expected to be received from maturing assets than paid out for maturing liabilities. This suggests a potential cash inflow or surplus for that period.
A negative gap means that more cash is expected to be paid out for maturing liabilities than received from maturing assets. This indicates a potential cash outflow or deficit that the entity needs to cover, possibly by using existing cash reserves, selling other assets, or borrowing.
Managing the Maturity Gap helps identify potential liquidity shortages before they occur, allowing time for appropriate actions to be taken.
Maturity Gap Examples
These examples demonstrate different scenarios:
Example 1: Positive Gap (Liquidity Surplus)
Scenario: A company analyzes the next 3 months.
Inputs: Assets Maturing = $500,000; Liabilities Maturing = $300,000.
Calculation: Gap = $500,000 - $300,000 = $200,000.
Result: Maturity Gap = $200,000.
Conclusion: A $200,000 positive gap indicates a likely cash surplus in the next 3 months.
Example 2: Negative Gap (Liquidity Need)
Scenario: A bank looks at the next week.
Inputs: Assets Maturing = €1,000,000; Liabilities Maturing = €1,500,000.
Calculation: Gap = €1,000,000 - €1,500,000 = -€500,000.
Result: Maturity Gap = -€500,000.
Conclusion: A -€500,000 negative gap suggests a potential €500,000 liquidity need within the week.
Example 3: Zero Gap (Balanced Maturities)
Scenario: Analyzing a specific bond portfolio and its funding over the next year.
Inputs: Assets Maturing = £750,000; Liabilities Maturing = £750,000.
Calculation: Gap = £750,000 - £750,000 = £0.
Result: Maturity Gap = £0.
Conclusion: A zero gap indicates that maturities are perfectly matched for this period.
Example 4: Large Positive Gap
Scenario: A large corporation expects a major loan repayment soon.
Inputs: Assets Maturing = $10,000,000; Liabilities Maturing = $1,000,000.
Calculation: Gap = $10,000,000 - $1,000,000 = $9,000,000.
Result: Maturity Gap = $9,000,000.
Conclusion: A large positive gap suggests significant cash inflow for this period.
Example 5: Large Negative Gap
Scenario: A startup needs to repay a large short-term debt.
Inputs: Assets Maturing = $50,000; Liabilities Maturing = $500,000.
Calculation: Gap = $50,000 - $500,000 = -$450,000.
Result: Maturity Gap = -$450,000.
Conclusion: A large negative gap highlights a substantial potential cash shortfall.
Example 6: Small Positive Gap
Scenario: Analyzing a small business's cash flow for next month.
Inputs: Assets Maturing = $15,000; Liabilities Maturing = $12,000.
Calculation: Gap = $15,000 - $12,000 = $3,000.
Result: Maturity Gap = $3,000.
Conclusion: A small positive gap suggests a modest surplus for the month.
Example 7: Small Negative Gap
Scenario: A non-profit is managing its short-term funds.
Inputs:s Assets Maturing = $8,000; Liabilities Maturing = $9,500.
Calculation: Gap = $8,000 - $9,500 = -$1,500.
Result: Maturity Gap = -$1,500.
Conclusion: A small negative gap indicates a minor shortfall to manage.
Example 8: Future Period Analysis
Scenario: Analyzing maturities in the period 1-2 years from now.
Inputs: Assets Maturing = $2,500,000; Liabilities Maturing = $2,000,000.
Calculation: Gap = $2,500,000 - $2,000,000 = $500,000.
Result: Maturity Gap = $500,000.
Conclusion: This future period shows an expected surplus.
Example 9: All Assets, No Liabilities
Scenario: Expecting a large receivable with no payables due in the same period.
Inputs: Assets Maturing = $150,000; Liabilities Maturing = $0.
Calculation: Gap = $150,000 - $0 = $150,000.
Result: Maturity Gap = $150,000.
Conclusion: A positive gap equal to the asset value when no liabilities mature.
Example 10: All Liabilities, No Assets
Scenario: A large payment is due with no expected incoming cash from maturing assets in the same short period.
Inputs: Assets Maturing = $0; Liabilities Maturing = $80,000.
Calculation: Gap = $0 - $80,000 = -$80,000.
Result: Maturity Gap = -$80,000.
Conclusion: A negative gap equal to the liability value when no assets mature.
Frequently Asked Questions about Maturity Gap
1. What does the Maturity Gap tell me?
It shows the difference between the cash inflows (from maturing assets) and cash outflows (from maturing liabilities) expected within a specific future time period. It helps assess potential liquidity surpluses or deficits.
2. Is a positive Maturity Gap always good?
A positive gap indicates a potential cash surplus, which is generally good for liquidity. However, a *very large* positive gap might suggest assets are maturing significantly faster than liabilities, which could imply a need to reinvest or manage the incoming cash efficiently.
3. Is a negative Maturity Gap always bad?
A negative gap signals a potential liquidity need or cash shortfall for that period. It's not necessarily "bad" if the entity has sufficient liquid reserves or access to funding to cover the gap, but it highlights a risk that needs management.
4. What "period" should I use for the calculator?
The period depends on your analysis needs. Common periods are short-term (e.g., next day, week, month) for immediate liquidity management, or longer terms (e.g., 3 months, 6 months, 1 year) for strategic planning. Use the same consistent period for both inputs.
5. What types of "Assets Maturing" are included?
This includes assets that convert to cash within the period, such as maturing loans receivable, maturing investments (bonds, CDs), accounts receivable expected to be collected, etc.
6. What types of "Liabilities Maturing" are included?
This includes obligations that require a cash payout within the period, such as maturing debt (loans payable, bonds due), accounts payable, interest payments due, scheduled principal repayments, etc.
7. Can I use this calculator for multiple time periods?
This specific tool calculates the gap for *one* period at a time. To analyze multiple periods (a typical maturity gap analysis), you would repeat the calculation for each desired time bucket (e.g., 0-30 days, 31-90 days, etc.).
8. Does this calculator handle currencies?
The calculator performs the math based on the numbers you enter. You must ensure both inputs are in the *same* currency for the result to be meaningful (e.g., enter both in USD, or both in EUR, etc.). The output will be in the same implied currency.
9. What if an asset or liability matures *outside* the period I'm looking at?
They are not included in the calculation for *this specific* period. You would include them when you analyze the period in which they *do* mature.
10. Are negative inputs allowed?
No, asset and liability values represent sums of value maturing and must be non-negative (zero or positive). The calculator will flag an error for negative inputs.
