What Are Liquid Assets - Definition - Meaning - Example - Explanation

Liquid Assets are those Assets which are convertible into Cash very quickly. How much an asset convertible into Cash depends upon the Quick Ratio Or Liquidity Ratio that is equal to Quick Assets / Current Liabilities. Examples of Liquid Assets include Cash And Cash Equivalents such as Shares, Commercial Paper, etc., Accounts Receivable, Short-Term Investments, etc.

Accounts Receivable is also one of the most liquid assets as it usually converted into cash within an accounting period usually within one month or 3 months.

Liquids Assets are recorded on the Balance Sheet as Current Assets and at first place that is the Right Order of Balance Sheet according to Liquidity Order i.e., the most liquid asset comes first then second one most and so on.

Liquid Assets are important to a company as it helps its business in meeting its short-term obligations or improve Working Capital that is necessary for the smooth working and Stabilization of the Business.

Liquid Assets are also called Quick Assets in accounting.