Which statement best defines liquidity?
Expert-Verified Answer
Definition: Liquidity means how quickly you can get your hands on your cash. In simpler terms, liquidity is to get your money whenever you need it.
Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price.
The answer is D - how available the money is to spend.
What is liquidity? How quickly and easily an asset can be converted into cash.
Liquidity is best defined as: how quickly and easily an asset can be converted into cash.
A liquid asset is a type of asset that can be rapidly converted into cash while keeping its market value. There are other factors that make assets more or less liquid, including: How established the market is. How easily ownership is transferred. How long it takes for the assets to be sold (liquidated)
The cash ratio is the most conservative measure of liquidity, calculated by dividing cash and cash equivalents by current liabilities. It shows your ability to pay off short-term debts with cash on hand, ignoring receivables and inventory, which may take time to convert into cash.
The main goal of a liquidity decision is to ensure that a company has enough liquid assets to meet its short-term obligations. For example, paying bills, salaries, and other operating expenses, as they become due. At the same time, the company must also ensure that it does not hold too much cash or other liquid assets.
Liquidity refers to the amount of money an individual or corporation has on hand and the ability to quickly convert assets into cash. The higher the liquidity, the easier it is to meet financial obligations, whether you're a business or a human being.
What is the liquidity of money in economics?
In terms of financial instruments, liquidity generally refers to those assets that can be converted into a medium of exchange quickly without a significant loss in value. Only highly liquid financial instruments can be considered as close substitutes for the medium of exchange and therefore be included in broad money.
The money supply, sometimes referred to as the money stock, has many classifications of liquidity. The total money supply includes all of the currency in circulation as well as liquid financial products, such as certificates of deposit (CDs). The M3 classification is the broadest measure of an economy's money supply.
Answer and Explanation: Assets and liabilities are the two important factors considered while managing liquidity. For banks, it has been observed that asset-based liquidity is more significant than liability-based liquidity.
Answer and Explanation:
Both the c) quick ratio and d) current ratio are liquidity ratios. The current ratio simply divides current assets by current liabilities to see how many times the current assets can pay the current liabilities. The quick ratio is more conservative and excludes inventory for its calculation.
Cash in hand is considered to be the most liquid type of liquid assets because it is money itself.
Equity is the share someone owns in any asset, a company, stocks for examples. Equity is related to the money or value you have in the business. Liquidity relates to your ability to pay your bills and stay in business. Liquidity is the amount of cash and readily marketable securities you have.
Liquid credit provides an income-driven return stream that offers a spread premium above government bonds, and also creates diversification benefits relative to equities.
One of the most common types of liquidity ratios used to determine a company's financial health is the current ratio. This compares all of the business's current assets to all of its current obligations. Quick ratio and cash ratio are two types of liquidity ratios that lenders and investors sometimes look at.
- Cash in Hand.
- Cash in Bank.
- Cash Equivalents.
- Accrued Income.
- Promissory Notes.
- Government Bonds.
- Stocks.
- Marketable Securities.
Final answer:
Liquidity refers to how easily an investment can be exchanged for cash. Highly liquid investments can be quickly converted into cash without significant costs or losses.
Which assets have the highest liquidity?
Cash is the most liquid asset, followed by cash equivalents, which are things like money market accounts, certificates of deposit (CDs), or time deposits.
Liquidity is a company's ability to convert assets to cash or acquire cash—through a loan or money in the bank—to pay its short-term obligations or liabilities.
The correct answer is b. Receivable Turnover. Receivable turnover is a measure of liquid...
Financial liquidity is neither good nor bad. Instead, it is a feature of every investment one should consider before investing. Modern portfolio theory revolves around owning a range of assets that diversify one's portfolio while maximizing the return given one's risk tolerance.
Although you want to have a high enough liquidity ratio to cover any expenses, keeping too much cash on hand can mean you aren't taking advantage of investment or growth opportunities, making your company stagnant.
