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What items are considered liquid assets?

What items are considered liquid assets?

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Question added by Mohammad Iqbal Abubaker , Jahaca Pty Ltd - Accounts Administrator , Jahaca Pty Ltd - Accounts Administrator
Date Posted: 2016/02/05
Ananta Roy
by Ananta Roy , Accounting Manager / Financial Analyst , Fura Gems Inc DMCC

An asset which can be easily convertible in Cash Viz. cash in hand, bond, shares, mutual funds etc. 

JL P
by JL P , Assistant Accountant , Al Rawabi Dairy Co. L.L.C.

Cash, and any assets that can be sold for cash immediately.

Ali Majeed Abdul Majeed
by Ali Majeed Abdul Majeed , Finance Manager , Al Ahlia Integarted General Trading & Contracting Co. W.L.L.

Elements of Liquid Assets

Accounts Receivabels 

Inventory

Blue Chip Stock

Cash & Cash Equivalents 

 

Muhammad Usman
by Muhammad Usman , Audit Senior Associate , Assurance and Business Advisory Services

An asset that can be converted into cash in a short time, with little or no loss in value.

Mohammad Iqbal Abubaker
by Mohammad Iqbal Abubaker , Jahaca Pty Ltd - Accounts Administrator , Jahaca Pty Ltd - Accounts Administrator

A liquid asset is cash on hand or an asset that can be readily converted to cash. An asset that can readily be converted into cash is similar to cash itself because the asset can be sold with little impact on its value.

 

For example, cash on hand is considered a liquid asset due to its ability to be readily accessed. Cash is legal tender a company can use to settle its current liabilities. Suppose a person or a company has money in a checking or savings account. The cash in the account is considered liquid because it can be withdrawn easily to settle liabilities.

 

Investments are considered liquid assets because they can be readily liquidated. For example, shares of stock, bonds, money market funds and mutual funds are considered liquid assets. These assets can be converted to cash in a short period of time in the event a financial emergency arises. Generally, investments are considered liquid assets because they can be easily sold, depending on the investment.

 

An example of a non-liquid asset is a real estate investment because it can take months for a person or company to receive cash from the sale. For example, suppose a company owns real estate property and wants to liquidate because it has to pay off a debt obligation within a month. The company may take more than one month to sell its property. If the company wants to sell the property quickly, the value of the property can result in a loss.

 

A liquid asset can be readily converted into cash with little impact on the value. In the case of a company trying to liquidate its real estate investment, liquidating can have a high impact on its value.

 

 

 

 

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