Liquid assets are financial resources which can be readily turned into cash or are already cash. Financial experts explain liquid assets as resources which can be turned into cash in just twenty days or less and which can likely be sold at a price based on the market value of the item. The latter part of the statement is especially important because it explains what a true asset must be – assets should earn you money, and not otherwise. Examples of liquid assets include 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 just like those in the stock markets are more liquid over those investments in real estate markets. Real estate, however, may still be considered a liquid asset when it is paid in full for twenty days or less. With that said, it means that an item is said to be non-liquid when payment is done on installment.
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 in the form of coins, paper bills, or even debit cards are classified as liquid assets because it can be used to pay bills as well as purchase products and services instantly. Cash savings in the bank is another fine example of liquid assets. These are classified as such because account holders can easily withdraw cash when they need to. As pointed out previously, stocks are perceived as liquid assets due to the fact that they can be turned into cash quickly. Stock exchanges allow easy buying and selling of stocks at fair, realistic prices. Bonds are likewise considered as liquid assets because applying for loan, for example, is an easy, reliable way to get cash.
A business must have a healthy balance of liquid assets in order to be successful and profitable. Investors will shell out more and creditors will lend more if they know that a business has enough liquid assets to fulfill its financial obligations.
