Emergency Fund Planning Flashcards
1
Q
Rule of Thumb to Adequate Liquidity
A
The rule of thumb in maintaining adequate liquidity often used by financial advisers is to hold liquid assets equal to three to six months of your take-home pay. These assets can serve as a buffer in case loss of income occurs due to unexpected circumstances.
2
Q
Liquid Ratio
A
The Liquid Ratio measures liquid assets against current liabilities. The liquid ratio is also known as the “current ratio” and the assets and liabilities to compute this ratio are found on the personal Balance Sheet.
