Liquid Assets refer to those assets which can be easily converted into cash within a short span of time, with very little or absolutely no loss in value. These assets are usually regarded as synonymous to cash. Liquid assets are also known as quick assets.
For an asset to be liquid, it should be easily sell-able without an impact on its price. Also, the ownership of this type of an asset should be easily transferable.
Liquid assets generally include the following:
- Cash and Currency
- Account Receivables
- Money Market Instruments
- Stocks
- Government Bonds
- Mutual Funds
- Time and Demand Deposits
- Precious Metals such as silver and gold
- And other cash equivalents
The funds in your bank account is a liquid asset as it can be easily withdrawn in order to settle the liabilities. Investments such as stocks, mutual funds and bonds are also taken under the same category of assets as these can be easily liquidated i.e. these can be readily converted into cash, in an event of financial crisis.
Investments such as in real estate is a non-Liquid asset. This is because it can take a considerable amount of time to convert the investment into cash i.e. To receive cash from the sale. If someone wants to sell the same within a short period of time, there may be a significant loss in its value.
When we commonly calculate our assets, we just think of precious metals, cash and land with us. It’s really nice to know that funds, bonds, stocks and money in the bank are assets, and it is considered as liquid assets. !I never thought bonds as assets till today. Nice read, simple but useful.
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