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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...
- Claire Boyte-White
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.
Jun 27, 2024 · Liquid assets are important because a company consistently needs cash to meet its short-term obligations. Without cash, a company can't pay its bills to vendors or wages to...
- 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 8, 2022 · In accounting terms, liquid assets are cash or cash equivalents that are readily convertible to cash. Their liquidation is secure, meaning that the holder can convert them for cash without any issues. Also, it should happen in a short duration of time with little or no loss of value on conversion.
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.
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Jul 19, 2022 · Liquidity is important as it indicates whether there will be the short-term inability to satisfy debts or make agreements whole. Understanding Financial Liquidity. Assets...
