liquidity

(noun)

An asset's property of being able to be sold without affecting its value; the degree to which it can be easily converted into cash.

Related Terms

Examples of liquidity in the following topics:

  • Liquidation

    • In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed.
    • Liquidation is sometimes referred to as 'winding-up' or 'dissolution', although dissolution technically refers to the last stage of liquidation.
    • Liquidation may either be compulsory (sometimes referred to as a 'creditors' liquidation') or voluntary (sometimes referred to as a 'shareholders' liquidation', although some voluntary liquidations are controlled by the creditors) .
    • The parties who are entitled by law to petition for the compulsory liquidation of a company vary from jurisdiction to jurisdiction, but generally, a petition may be lodged with the court for the compulsory liquidation of a company by:
    • LIFO liquidation refers to when a company using LIFO accounting methods liquidates their older LIFO inventory.

  • Acid Test Ratio

    • In contrast, if the business has negotiated fast payment terms with customers and long payment terms from suppliers, it may have a very low quick ratio yet good liquidity .
    • In general, the higher the ratio is, the greater the company's liquidity (i.e., the better able to meet current obligations using liquid assets).

  • Importance of Cash Flow Accounting

    • The measurement of cash flow can be used for calculating other parameters that give information on a company's value, liquidity or solvency, and situation.
    • Being profitable does not necessarily mean being liquid.

  • What Is Cash?

    • Cash and cash equivalents are the most liquid type of company assets used by businesses to settle debts and purchase goods.
    • Cash is the most liquid of all company assets.

  • Working Capital Management Analysis

    • Working capital is a financial metric that represents the operational liquidity of a business, organization, or other entity.
    • Working capital (abbreviated WC) is a financial metric that represents the operational liquidity of a business, organization, or other entity.
    • A company can be endowed with assets and profitability but short on liquidity if its assets cannot be converted into cash .

  • Introduction to the Statement of Cash Flows

    • The cash flow statement provides information on a firm's liquidity and solvency.
    • The cash flow statement is intended to provide information on a firm's liquidity and solvency.
    • The statement of cash flows shows the liquidity of a company.

  • Current Ratio

    • The ratio is an indication of a firm's market liquidity and ability to meet creditor's demands.
    • The current ratio can be use to evaluate a company's liquidity.

  • Fair Value Method

    • Under US GAAP (FAS 157), fair value is the amount at which the asset could be bought or sold in a current transaction between willing parties, or transferred to an equivalent party, other than in a liquidation sale.
    • Other examples of sales that would not meet the test of fair market value include a liquidation sale, deed in lieu of foreclosure, distressed sale, and similar types of transactions.

  • Introduction to the Balance Sheet

    • The main categories of assets are usually listed first, and typically in order of liquidity (for example, cash on hand appears above accounts receivable).
    • The balance sheet also demonstrates how liquid the business is.

  • Types of Receivables

    • If significant, these nontrade receivables are usually listed in separate categories on the balance sheet because each type of nontrade receivable has distinct risk factors and liquidity characteristics.