The most liquid asset is cash
A liquid asset is an enterprise's resources that can be converted into cash in a relatively short time with minimal costs.The most highly liquid asset is recognizedvarious cash assets represented by cash on hand, on bank accounts and short-term deposits. Another liquid asset is represented by circulating assets in the form of short-term financial investments (examples are securities, for which it is possible at any time to sell them, thanks to the high quotation on the stock exchange). But a short-term receivables can not be called a highly liquid asset, however, its ease of implementation is much higher than that of stocks and other current assets.
In fact, such a liquid asset asaccounts receivable, can be estimated from the position of speed of its collection or sale. An important point in this issue is the presence of a free market, where such debt can be handled. Less liquid asset - the availability of stock in the form of raw materials, materials and costs in the work in process.
The domestic balance sheet is formedthus: first, non-negotiable assets are displayed, and only then - current assets. Thus, short-term investments of financial resources and cash are considered to be the most liquid assets.
To assess certain assetsAbsolute, fast, 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 liquidassets, it is necessary to consider those resources, with the implementation of which the company has the opportunity to pay its debts in a relatively short time. In other words, how easily an enterprise can be realized is an indicator of its financial stability.
When conducting an analysis of financial activitiessubject of management can be given an assessment of its creditworthiness. To do this, the calculation of the easy-to-realizability of the balance sheet is made, the results of which will show whether there is an opportunity for the enterprise to fully and timely pay off any of its liabilities. In other words, liquidity characterizes the ability of an entity to pay short-term obligations, due to the realization of its current assets.
Understand the level of creditworthiness of an enterpriseIt is necessary to determine the ability to fully and in due time settle for all of its obligations. The method of analyzing the ease of implementing the balance involves comparing the funds reflected in the asset and grouped by the level of their liquidity, with liabilities recorded in the passive and grouped according to the maturity dates. During 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 obtained are compared with their normal limitations. And in the end, the relevant conclusions are drawn.