What are Liquid Assets?
Liquid assets are defined as those assets that can be easily convertible to cash or can be quickly sold in the market without causing a significant impact on their value. Examples include cash in hand, bank deposits, and securities like stocks and bonds that can be easily traded. Liquidity is a measure of how quickly an asset can be bought or sold in the market without causing a substantial change in its price. Highly liquid assets provide flexibility and are crucial for meeting short-term financial obligations or taking advantage of investment opportunities.
Geeky Takeaways:
- Maintaining a portion of one’s assets in liquid form helps in managing unforeseen financial needs or emergencies.
- Liquid assets provide financial flexibility, allowing individuals and businesses to adapt to changing circumstances, seize opportunities, or meet unexpected expenses.
Difference between Liquid Assets and Illiquid Assets
Assets are defined as any type of tangible/intangible property(s) that the business/organization owns. Assets are valuable for the day-to-day running of business operations. Examples of Assets can include, cash in hand, cash at the bank, debtors, land and property, machinery, goodwill, patents, trademarks, etc. Assets can be further classified as liquid assets and illiquid assets. Liquid assets can be easily converted into cash while illiquid assets face difficulty in getting converted into cash.
Table of Content
- What are Liquid Assets?
- What are Illiquid Assets?
- Difference Between Liquid Assets and Illiquid Assets