Liquid assets are assets that can be easily converted into cash in a short amount of time. They are considered to be the most basic type of asset available. Examples of liquid assets include cash, money market instruments, and marketable securities. In addition, inventory, accounts receivable, and stocks are also considered liquid assets because they can be quickly converted to cash. Liquid assets are different from non-liquid assets, such as property, vehicles, or jewelry, which can take longer to sell and may lose value in the sale.
Companies usually need to keep a certain amount of liquid assets to meet short-term obligations. A company can measure its liquidity by comparing the amount of liquid assets with the amount of current liabilities. In personal finance, liquid assets are investments that an individual may easily convert to cash without incurring fiscal penalties.
It is important to have liquid assets for situations when money is needed quickly, such as unexpected expenses for medical care or car repairs. Many people keep both liquid and non-liquid assets in order to help diversify their wealth.
