Liquid assets

(noun)

An asset in the form of money or cash in hand, or an asset which can be quickly converted into cash without losing much value.

Related Terms

Examples of Liquid assets in the following topics:

  • Liquidity

    • The main categories of assets are usually listed first, and typically in order of liquidity.
    • Money, or cash, is the most liquid asset, and can be used immediately to perform economic actions like buying, selling, or paying debt, meeting immediate wants and needs.
    • Liquidity also refers both to a business's ability to meet its payment obligations, in terms of possessing sufficient liquid assets, and to such assets themselves.
    • For assets themselves, liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value.
    • The formula is the following: LR = liquid assets / short-term liabilities.

  • Assets

    • In financial accounting, assets are economic resources.
    • Simply stated, assets represent ownership of value that can be converted into cash (although cash itself is also considered an asset).
    • Two major classes are tangible assets and intangible assets .
    • Tangible assets contain various subclasses, including current and fixed assets.
    • Current assets include inventory, while fixed assets include such items as buildings and equipment.

  • Reasons for Maintaining Cash on Hand

    • In business, economics, or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value.
    • Money, or cash, is the most liquid asset, and can be used immediately to perform economic actions like buying, selling, paying debt, and meeting immediate wants and needs.
    • Managing liquidity is a daily process requiring bankers to monitor and project cash flows to ensure adequate liquidity is maintained.
    • Maintaining a balance between short-term assets and short-term liabilities is critical.
    • The investment portfolio represents a smaller portion of assets, and serves as the primary source of liquidity.

  • Liquidation Preference

    • After the removal of all assets which are subject to retention of title arrangements, fixed security, or are otherwise subject to proprietary claims of others, the liquidator will pay the claims against the company's assets.
    • After the removal of all assets which are subject to retention of title arrangements, fixed security, or are otherwise subject to proprietary claims of others, the liquidator will pay the claims against the company's assets.
    • Shareholders (Liquidating distribution) - Most preferred stocks are preferred as to assets in the event of liquidation of the corporation.
    • Stock preferred as to assets is preferred stock that receives special treatment in liquidation.
    • Preferred stockholders receive the par value (or a larger stipulated liquidation value) per share before any assets are distributed to common stockholders.

  • Liquidity Ratios

    • Liquidity ratios measure how quickly assets can be turned into cash in order to pay the company's short-term obligations.
    • Liquidity ratios measure a company's ability to pay short-term obligations of one year or less (i.e., how quickly assets can be turned into cash).
    • A high liquidity ratio indicates that a business is holding too much cash that could be utilized in other areas.
    • A low liquidity ratio means a firm may struggle to pay short-term obligations.
    • A firm may improve its liquidity ratios by raising the value of its current assets, reducing the value of current liabilities, or negotiating delayed or lower payments to creditors.

  • Assets

    • Assets on a balance sheet are classified into current assets and non-current assets.
    • The main categories of assets are usually listed first, and normally, in order of liquidity.
    • On the left side of a balance sheet, assets will typically be classified into current assets and non-current (long-term) assets.
    • Cash and cash equivalents are the most liquid assets found within the asset portion of a company's balance sheet.
    • This can be compared with current assets such as cash or bank accounts, which are described as liquid assets.

  • Fixed Assets Turnover Ratio

    • Fixed-asset turnover is the ratio of sales to value of fixed assets, indicating how well the business uses fixed assets to generate sales.
    • Fixed assets, also known as a non-current asset or as property, plant, and equipment (PP&E), is a term used in accounting for assets and property that cannot easily be converted into cash.
    • This can be compared with current assets, such as cash or bank accounts, which are described as liquid assets.
    • Fixed asset turnover = Net sales / Average net fixed assets
    • Fixed-asset turnover indicates how well the business is using its fixed assets to generate sales.

  • Liquidation

    • In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed.
    • In law, liquidation is the process by which a company (or part of a company) is brought to an end, and the assets and property of the company are redistributed.
    • After the removal of all assets which are subject to retention of title arrangements, fixed security, or are otherwise subject to proprietary claims of others, the liquidator will pay the claims against the company's assets.
    • Generally, the priority of claims on the company's assets will be determined in the following order:
    • (Italian for Alitalia - Italian Air Company), is an Italian airline, which bought some assets from the liquidation process of the old Alitalia-Linee Aeree Italiane and the entire Air One.

  • The Imperative of Liquidity

    • To accurately frame the discussion of cash flows, an understanding of liquidity is integral.
    • When considering cash flow, it is important to understand liquidity risk.
    • The difficulty in taking a certain asset to market, and recovering capital without incurring a loss of value, is called liquidity risk.
    • When looking at overall cash flow, it's important to consider how easily the available assets and investments are converted into capital to capture external opportunities.
    • Inflation generally devalues any cash asset, and investing capital into money markets can generate interest.

  • Total Debt to Total Assets

    • The debt ratio is expressed as Total debt / Total assets.
    • It is the ratio of total debt (the sum of current liabilities and long-term liabilities) and total assets (the sum of current assets, fixed assets, and other assets such as 'goodwill').
    • Total liabilities divided by total assets.
    • The debt/asset ratio shows the proportion of a company's assets which are financed through debt.
    • Companies with high debt/asset ratios are said to be "highly leveraged," not highly liquid as stated above.