Liquid Asset

A liquid asset can be defined as an asset that can be converted into cash with a quick action and the impact to the price of the asset is quite minimal that helps in avoiding loss. Liquated assets are regarded and treated as cash as they readily available for liquidation when there is sudden requirement of the cash. Moreover the price of the liquid is stable as compared to the other assets when it is compared in the open market.

An asset is called a liquid asset when it has established its own market where there are a number of participants on the market that absorb the selling of the liquid asset in such a way that there is no material effect on the price of the asset. In order to be an asset to be declared as a liquid asset it must be easily sellable as well as the ownership movement of liquid asset must be easy so that it can be sold as soon as possible. The most common example of a liquid asset is the stocks of the company. In addition to stocks money market instruments and the government bonds are also included in the types of liquid assets as they are readily sold by the companies and government institutes to accumulate cash. The most appropriate example of a liquid market is that of a foreign exchange market where trillions of dollars are being sold and purchased in the world in the form of liquid assets.

Other Related Accounting Articles:

• Unrestricted Cash
• Absolute Interest
• Future Contract
• Redundant Asset
• Overcapitalization
• Affect of Assets and Liabilities on Business Cash Flow
• Pooling of Interest
• Market Discount
• Savings Account