What is a Liquid Asset?
Question:
Answer:
A liquid assesst is bascily something that can be turned into cash quick.
Furniture and a house are not.
Savings is. Stocks are also somewhat liquid if they are not restricted, or in a 401K/IRA.
Liquid assets would be anything you could turn into cash in a pinch...so stocks, and a savings account would be fall into this category. Furniture and a house would not because they would take more time to turn into cash.
liquidity refers to the ability of being able to meet financial obligations as they fall due. So in leymans terms being able to pay someone when the time arises. In theory, for you to pay someone, you need cash. So the process of turing an asset into cash is referred to as liquidating. So the quicker or more easily this process can be done the more liquid an asset is. Be careful not to focus too much on the types of assets that are liquid rather try and understand the concept behind it. For example. If you gave your mum $100 and she went overseas with that money and u cant retreive it then it is not considered a liquid asset. Even though a debtor/accounts receivable is a liquid asset in the general sense.
Hope it helps, always remember conceptual understanding is important.
A Liquid Asset is something you can liquidate promptly if you require CASH $.
Savings
Paid Off Vehicle
Paid Off Home
Stocks
Savings Bonds
Money in your Mattress
Things you can SELL quickly to get reasonable amount of CASH you're correct!
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$...
Have a nice day and GOOD LUCK! :-)
More Questions & Answers...