Search results
Jun 27, 2024 · A liquid asset is an asset that can easily be converted into cash within a short amount of time. ... a company’s liquid assets are reported on its balance sheet as current assets.
Oct 14, 2024 · A liquid asset is either available cash or an instrument that can easily be converted to cash. Liquid assets are perceived as being essentially identical to cash because they don't lose value when ...
- Steven Nickolas
- 2 min
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.
- 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.
Jan 22, 2023 · A company's liquid asset total also impacts a number of key financial ratios. Companies use metrics such as the cash, current and quick ratio to assess how well the business manages its money.
- Claire Boyte-White
Jul 7, 2024 · Liquid assets hold an economic value for an individual, corporation, or government. It is expected to provide future economic benefits to the holder of the asset within a period of 90 days. Such resources are classified as assets on the company’s balance sheet, and assets can broadly be classified as tangible and intangible assets.
People also ask
What are liquid assets?
How are liquid assets reported on a balance sheet?
How does a company's Liquid Asset total affect financial ratios?
Why do businesses need liquid assets?
Are liquid assets essentially identical to cash?
Are liquid assets a part of your net worth?
A company’s cash ratio, for example, tells us whether it could use its liquid assets to pay off its current liabilities. We calculate cash ratio by adding all cash and cash equivalent and dividing the total by short-term obligations. Current assets include all liquid assets plus other assets that we can convert into cash within one year.
