Search results
Jun 27, 2024 · A liquid asset is an asset that can easily be converted into cash in a short amount of time. Liquid assets include things like cash, money market instruments, and marketable securities. Both ...
- 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.
Cash ratio – As the most stringent accounting liquidity ratio, the cash ratio excludes inventories, accounts receivable, and other current assets, defining liquid assets solely as cash or cash equivalents. This means that it’s the best formula for assessing your company’s ability to stay solvent in an emergency.
Liquidity is one of the key factors that determine success in the world of business. 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.
May 18, 2024 · Other liquid assets include stocks, bonds, and other exchange-traded securities. Tangible items tend to be less liquid, meaning that it can take more time, effort, and cost to sell them (e.g., a ...
- 2 min
Jul 19, 2022 · This means the company has poor liquidity as its current assets do not have enough value to cover its short-term debt. A non-financial example is the release of popular products that sell-out ...
People also ask
What is a liquid asset?
What is accounting liquidity?
How are liquid assets reported on a balance sheet?
Are accounts receivable a liquid asset?
Is a liquid asset a cash equivalent?
Are liquid assets a part of your net worth?
Dec 22, 2020 · Liquidity is a measure companies uses to examine their ability to cover short-term financial obligations. It’s a measure of your business’s ability to convert assets—or anything your company owns with financial value—into cash. Liquid assets can be quickly and easily changed into currency.
