ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Liquidity refers to the ease at which an asset can be converted into cash without negatively affecting its market price; the risk arises when a company cannot buy or sell an investment in exchange for cash fast enough to pay its debts.

Detailed explanation-2: -Long-term assets, sometimes called capital assets, are more difficult to turn into cash. These assets include equipment, furniture, and fixtures, then land and buildings. Note that land and buildings take the longest to be converted into cash, so they are listed last.

Detailed explanation-3: -Liquidity is an up-to-date measure of a business’s ability to quickly convert assets to cash. Some assets are more liquid than others: Current assets are the most liquid. They can be used for transactions almost instantly.

Detailed explanation-4: -Anything of financial value to a business or individual is considered an asset. Liquid assets, however, are the assets that can be easily, securely, and quickly exchanged for legal tender. Your inventory, accounts receivable, and stocks are examples of liquid assets-things you can quickly convert to hard cash.

Detailed explanation-5: -Liquidity describes your ability to exchange an asset for cash. The easier it is to convert an asset into cash, the more liquid it is. And cash is generally considered the most liquid asset. Cash in a bank account or credit union account can be accessed quickly and easily, via a bank transfer or an ATM withdrawal.