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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 in a hurry. The most common examples ...
- 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.
Jun 27, 2024 · An example of a liquid asset is money market holdings. Money market accounts usually do not have hold restrictions or lockup periods (i.e. you are not permitted to sell holdings for a specific ...
Apr 22, 2022 · As stated previously, liquid assets are important because they can be tapped easily to cover debt that's coming due or pay for unexpected expenses. People who suddenly find themselves out of work ...
A liquid asset is cash on hand or an asset other than cash that can be quickly converted into cash at a reasonable price. In other words, a liquid asset can be quickly sold on the market without a significant loss of its value. Generally, liquid assets are traded on well-established markets with a large number of buyers and sellers.
Nov 11, 2024 · Liquid Assets Calculation. We add all easily converted assets into cash to calculate a business's total liquid assets. This includes cash on hand, highly liquid investments, and other assets that can be easily accessible in case of an emergency. The formula to calculate liquid assets is: Liquid Assets = Cash and Cash Equivalents + Marketable ...
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Liquid assets can be easily converted into cash, such as money in bank accounts or stocks. Physical assets, while tangible, are generally considered non-liquid, like property, machinery, or vehicles, as they take more time and effort to sell and convert into cash. Why are liquid assets important for businesses?
