A liquid asset refers to cash on hand or any other asset that you can easily convert to cash. Besides cash, liquid assets include things like investments, inventory, and account receivable as well. Before you can consider an asset to be liquid, several factors must be present like the item or asset must be in a well-known market, with a significant number of buyers interested and with the ability for easy change of ownership.
Stock Market News Today – Examples of liquid assets
Apparently, cash is the most liquid of all the assets, unlike other types of assets, you don’t need to sell them to use them. The money in your savings and checking accounts that you can readily withdraw can also be seen as a cash asset. The cash in a certificate of deposit accounts is marginally less liquid because you may be fine for removing before the maturity date.
Also, you can consider investments such as mutual funds, bonds, and stocks to be liquid assets. Mutual funds can be sold quickly and daily – this means when you place an order to sell, it will be converted to cash the next day. With a bond, there are different degrees of liquidity, but you can usually sell them fair quickly and without the bonds losing too much market value. You can also trade stocks quite promptly with a click of the button and at a price within its market value.
When it comes to businesses, you can consider an asset to be liquid if you can easily convert them into cash within a year. Inventory can be estimated to be sold within a year, and the same thing goes to accounts receivable. Note, these are not the only type of liquid assets available, but they are the most popular ones. Assets are itemized in descending order of the liquidity on a company’s balance sheet.