Liquid Asset
Candlefocus EditorBusinesses should take note of their liquid assets as these items are typically easier to access and convert quickly than non-liquid assets such as fixed assets and equity. When making important financial and strategic decisions, having a robust set of liquid assets can help ensure stability of operations and reduce potential risks.
Cash and cash equivalents are the most liquid forms of assets, as they can be quickly converted into usable funds whenever necessary. Cash equivalents are investments that are short-term and highly marketable, such as treasury bills and certificates of deposit. Money market accounts can also provide significant liquidity. These accounts, which are maintained by financial institutions, are relatively low-risk and generally guarantee stable, competitive interest rates.
Marketable securities are also considered liquid assets, as they can generally be converted into cash quickly and easily. Examples of marketable securities include stocks, bonds, mutual funds, and exchange-traded funds. These investments can be sold easily, usually within a couple of days, although the length of time required depends on the type of security and the market conditions.
Short-term bonds can also provide liquidity for businesses. These bonds are designed to mature within one year, making them attractive investments for those looking to quickly access funds.
Finally, businesses also account for their accounts receivable as a liquid asset. Accounts receivable are payments owed to the company – such as payments from customers for goods or services they have purchased – that have yet to be collected. Because these payments will eventually be collected, they can be considered a liquid asset, although the length of time necessary to receive the money can vary depending on the customer.
In conclusion, liquid assets are an important part of any business’s financial portfolio. They provide a readily available source of cash and can help businesses access new opportunities or secure short-term financing. While not every asset may be liquid, it is important to understand which ones are, as they can help businesses effectively manage their cash position and better pursue their goals.