Liquidity Flashcards
What is liquidity?
The ability to pay liabilities in a timely manner
The ability to pay liabilities in a timely manner
What is liquidity?
Why is having a large amount of cash and current assets good?
Shows evidence of a high level of liquidity
Shows evidence of a high level of liquidity
Why is having a large amount of cash and current assets good?
What results in a high-level of liquidity?
An active market with many buyers and sellers
An active market with many buyers and sellers
What results in a high-level of liquidity?
What isn’t very liquid?
When an asset can only be sold off in short order at a steep discount
When an asset can only be sold off in short order at a steep discount
What isn’t very liquid?
Examples of liquid assets?
Marketable securities and accounts receivable
Marketable securities and accounts receivable
Examples of liquid assets?
When can marketable securities be sold?
In a day or two on an exchange
In a day or two on an exchange
When can marketable securities be sold?
When will receivables be paid for?
Within a few weeks, depending on the payment terms agreed with customers
Within a few weeks, depending on the payment terms agreed with customers
When will receivables be paid for?
What happens when current assets aren’t properly aligned with current liabilities?
Need to obtain alternative financing, such as a line of credit. To pay for obligations
