{"id":12221,"date":"2023-10-29T19:31:20","date_gmt":"2023-10-29T19:31:20","guid":{"rendered":"https:\/\/tokendices.com\/everything-you-need-to-know-about-liquidity-and-liquid-assets\/"},"modified":"2023-10-29T19:31:20","modified_gmt":"2023-10-29T19:31:20","slug":"everything-you-need-to-know-about-liquidity-and-liquid-assets","status":"publish","type":"post","link":"https:\/\/tokendices.com\/everything-you-need-to-know-about-liquidity-and-liquid-assets\/","title":{"rendered":"Everything You Need to Know About Liquidity and Liquid Assets"},"content":{"rendered":"

Coinspeaker<\/a>
\nEverything You Need to Know About Liquidity and Liquid Assets<\/a><\/p>\n

Looking through financial content, you will see the terms ‘liquidity’ and ‘liquid assets’ popping up a lot. Whether it is about a company\u2019s liquidity or liquid assets in an individual investment portfolio, liquidity seems to be a big deal in the world of business and investment. Specifically, having or not having liquidity can make or break an enterprise or portfolio.<\/p>\n

As such, anyone interested in the worlds of business and money should get acquainted with these terms and how they can affect people and businesses. The following guide will help understand what exactly these terms mean and why they are important in the first place.<\/p>\n

What Is Liquidity?<\/h2>\n

In financial terms, liquidity is about how easily ‘liquid’ cash can be obtained. When talking about a business, for example, liquidity refers to how easily the entity can convert its current assets into spendable currency. A company’s liquidity level also indicates how much liquid cash it has at its disposal.<\/p>\n

For example, let’s say that a business needs to pay off a debt or pay its employees. The business might have $1 million in assets like furniture or stocked goods but only $10,000 in actual cash in the bank. In that case, a business has low liquidity. But if the stocked goods are the type that can easily be sold to raise money, you would say that the business is in a good place liquidity-wise. This is also not just limited to assets that can be converted to cash but also how easily the business can acquire a line of credit or a loan.<\/p>\n

The same principle applies to individuals. An individual might have a million dollars in property, for example, but not be able to quickly sell off this property to raise cash, in which case they are in a bad liquidity situation. To sum up, liquidity is an important indicator but not the ultimate authority of a person or company’s financial state. A person\/business might have very valuable assets but not just the type that can be sold off quickly and easily.<\/p>\n

Liquid Assets<\/h2>\n

Understanding liquidity equips us to better understand liquid assets and how they work. A liquid asset refers to cash or any asset that can be easily converted to cash when needed. The ultimate goal of liquidity is to have enough cash on hand to meet any immediate need and liquid assets are those that help to push this goal forward.<\/p>\n

There are many types of assets in the world but what separates liquid from non-liquid assets is how easily they can be turned into cash. Both stock and real estate are assets but while one can be sold at a moment\u2019s notice, the other will take weeks at a minimum to be sold for cash.<\/p>\n

Some examples of liquid assets include:<\/p>\n