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- A liquid asset is an asset that can be quickly converted into cash with minimal impact on its value. These assets are highly marketable and readily accessible for immediate financial needs. Liquid assets are crucial for both individuals and businesses to meet short-term obligations and unexpected expenses.
www.wallstreetoasis.com/resources/skills/finance/liquid-assetLiquid Asset - Definition, Examples, Balance Sheet Reporting
Jan 22, 2023 · An asset's liquidity is a function of how easily it can be converted into cash. In corporate finance, liquid assets are those that can be used to pay off debts...
- Claire Boyte-White
- Cash. Includes physical money (local and foreign currency) as well as the savings account and/or current account balances.
- Cash equivalents. Cash equivalents are investment securities with a maturity period not exceeding a year. Examples include treasury bills, treasury bonds, certificates of deposit, and money market funds.
- Marketable securities. Stocks, bonds, and exchange traded funds (ETFs) are examples of marketable securities with a high degree of liquidity. They can be sold easily and it usually takes just a few days to receive the cash from their sale.
- Accounts receivable. Money owed to a business by its customers for goods and services provided makes up accounts receivable. The liquidity of accounts receivable varies.
Liquid assets are essential for both personal and business financial health. For individuals, having enough liquid assets ensures they can cover short-term needs, such as bills, unexpected expenses, or even emergencies like medical situations.
Liquid assets ensure a company’s ability to meet its immediate financial obligations and operating expenses. In addition, the assets serve as the company’s protection from unforeseen adverse events, such as a recession or a sudden decline in demand for the company’s products or services.
Oct 28, 2024 · Why are liquid assets important? Liquid assets provide you with cash when your business needs it. This cash could cover operational costs such as supplier invoices, employee wages, insurance payments, and ongoing bills. More importantly, liquid assets are invaluable in providing a safety buffer.
Apr 22, 2022 · Liquid assets include cash and anything that can be converted into cash quickly and easily. Learn how they compare with other assets and why they're important for investors...
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Mar 14, 2024 · FAQs. What are liquid assets? A liquid asset is an asset that can be readily converted to cash without losing its market value. How readily an asset can be converted to cash depends on a few different factors: A large pool of potential buyers. Predictable or stable market price. Quick conversion into cash.