BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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how much money a business has available in the bank
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the level of current liabilities compared to current assets
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the ease with which an asset can be converted into cash
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the amount of short-term assets a business has
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Detailed explanation-1: -Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price. Cash is the most liquid of assets, while tangible items are less liquid. The two main types of liquidity include market liquidity and accounting liquidity.
Detailed explanation-2: -Liquidity describes how easy it is to convert a financial asset into cash without causing a big loss in value. If you don’t have cash on hand to cover expenses, liquidity can help you convert assets into usable income.
Detailed explanation-3: -A liquid asset is an asset that can easily be converted into cash within a short amount of time. Liquid assets generally tend to have liquid markets with high levels of demand and security. Businesses record liquid assets in the current assets portion of their balance sheet.
Detailed explanation-4: -Liquid assets means cash or cash equivalents which can be easily converted to cash in a very short time. Inventories and prepaid expenses are not considered as liquid asset else every current asset is liquid asset. Q.
Detailed explanation-5: -Liquidity refers to the measure of how easily an entity can convert securities and assets into cash. In simpler terms, liquid assets can be converted to currency quickly and easily. Businesses rely on this measure when examining their ability to take care of their short-term financial needs.