A liquid asset is an enterprise’s resources that can quickly turn into cash rather quickly and with minimal costs.
The most highly liquid assets are various cash assets represented at the cash desk, in bank accounts and short-term deposits. Another liquid asset is represented by current assets in the form of short-term financial investments (as examples, there are securities for which it is possible to sell them at any time, due to the high quotation on the exchange). But short-term receivables cannot be called a highly liquid asset, however, the ease of its implementation is an order of magnitude higher than that of stocks and other current assets.
In fact, such a liquid asset as a receivable can be estimated from the standpoint of the speed of collection or sale. An important point in the matter under consideration is the presence of a free market where such debt can be traded. A less liquid asset is the availability of stock in the form of raw materials, materials and costs in work in progress.
The domestic balance sheet is formed in this way: first, non-current assets are displayed, and only then - current assets. Thus, the most liquid assets include short-term investments of financial resources and cash.
To assess certain assets, absolute, quick, and current liquidity ratios are used. The most common among them are the second and third coefficients, their normal values should be up to one and up to two, respectively.
To determine what relates to liquid assets, it is necessary to consider those resources with the implementation of which the enterprise has the opportunity to pay off its debt in a fairly short time. In other words, how easy it is to realize an enterprise is an indicator of its financial stability.
When conducting an analysis of the financial activities of a business entity, an assessment of its creditworthiness can be given. For this, a balance sheet is easily calculated, the results of which will show whether the enterprise has the opportunity to fully and timely repay any of its obligations. In other words, liquidity characterizes the entity's ability to pay short-term liabilities through the sale of its current assets.
Understanding the level of creditworthiness of an enterprise is necessary to determine the ability to fully and in due time settle all its obligations. The methodology for analyzing the ease of implementation of the balance sheet involves a comparison of the funds displayed in the asset and grouped by their liquidity level with the obligations recorded in liabilities and grouped according to their maturity dates. When conducting the analysis, appropriate coefficients can be used, the calculation of which is given in any thematic educational literature. An analysis is carried out at the beginning and end of the period, and the results are compared with their normal limitations. And as a result, the corresponding conclusions are made.
