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Essay from the year 2014 in the subject Economics - Finance, , language: English, abstract: The subject of the relationship between theory and practice has long been focused by psychologists as to what extent theories can be used as the principles that guide practice. A theory has a fundamental role in providing researchers with frameworks and in guiding practitioners to formulate a problem in actual practice settings. This paper is divided into four sections. The first section explores the literature review of the relationship between theory and practice. The second section illustrates the short-term liquidity measurement theory in the context of how the theory can be translated into practice. In the third section of this paper, the researcher discusses the connections between the theory described and related applications. The fourth and concluding section outlines some recommendations.