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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.
Oct 28, 2024 · 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. If you need to make an urgent purchase or pay an unexpected bill, having a reserve ...
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 employees.
This is why a well-balanced financial portfolio usually includes liquid and non-liquid assets, allowing for long-term growth while maintaining flexibility for short-term needs. A key takeaway from this distinction is that individuals and businesses should not rely solely on fixed assets for financial security.
Dec 18, 2023 · Why Liquid Assets Matter. Liquid assets are the lifeblood of daily operations. They are what you use to pay off short-term financial obligations, such as accounts payable, wages, and other immediate expenses. The more liquid assets a business has, the more financial flexibility it possesses.
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Feb 12, 2024 · Liquidity management software helps treasurers forecast cash flows, manage bank accounts, optimize cash balances, and identify liquidity gaps. Additionally, it’s a good idea to adopt a procurement system so that all orders, expenses, and budgets are under control within a single platform and visible to all stakeholders.
