ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Answer and Explanation: The correct answer is option B) Liquidity. Liquidity is the relative ease and speed with which an asset can be converted into a medium of exchange. Assets such as cash and accounts receivable are considered more liquid than the assets such as inventory and equipment.

Detailed explanation-2: -Liquidity (the ease and speed with which an asset can be turned into cash) relative to alternative assets-The more liquid an asset is relative to alternative assets, holding everything else unchanged, the more desirable it is and the greater the quantity demanded will be.

Detailed explanation-3: -The ease with which an asset can be converted to cash without a significant loss in value. In the context of finance, the extent to which an asset can be readily bought or sold in the market without affecting its price.

Detailed explanation-4: -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. How much cash could your business access if you had to pay off what you owe today-and how fast could you get it? Liquidity answers that question.

Detailed explanation-5: -What Are Liquid Assets? Liquid assets are assets that can easily be exchanged for cash. While assets are valuable possessions that can be converted into cash, not all of your assets can be sold for cash right now, or without taking a loss on the sale. Common liquid assets include: Cash.