subject: Liquid Assets Definition And Examples [print this page] Liquid assets are resources with monetary worth which can be easily converted into cash or are already cash. Financial experts describe liquid assets as items which can be converted into cash for a period of less than twenty days and which can be sold without significant loss of value. The last part of the definition is particularly important because it describes what an asset really ought to be assets should not make you lose money in the end. A few familiar examples of liquid assets are cash, funds in the bank, stocks and bonds.
The liquidity of an item can be measured by the ease at which it can be bought and sold. Liquid market investments such as the ones in the stock markets are more liquid than investments in the real estate markets. On the other hand, real estate can still be regarded as a liquid asset if it is settled in full for no greater than twenty days. That being said, it means that an item is considered non-liquid when it is paid on an installment basis.
Money is, without a doubt, the best example of liquid asset because of the relative ease at which it can be bought or sold based on market value. Money, whether in the form coins, paper bills, or debit cards, are considered liquid assets because it can be used to settle bills and likewise purchase goods and services in no time. Funds in the bank are another good example of liquid assets. These are considered as liquid assets because account holders can quickly get some cash when there's a need to do so. As mentioned earlier, stocks are regarded as liquid assets because they can be easily converted into cash in just a short span of time. Stock exchanges allow easy buying and selling of stocks at fair, realistic prices. Bonds are yet another example of liquid assets because in a sense, borrowing money is a fast way to obtain cash.
In order to have a successful company, one must have a healthy balance of liquid assets. Investors will invest more and creditors will most likely grant loans if they discover that a company has the capacity to pay in the future.
