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 the various 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 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, as a receivable, can be estimated from the position of speed of its recovery 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 formed in this way: initially non-negotiable assets are shown, and only then - current assets. Thus, short-term investments of financial resources and cash are considered to be the most liquid assets.

Absolute, fast, and current liquidity ratios are used to estimate certain assets . 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 company has the opportunity to pay its debt in a relatively short time. In other words, how easily an enterprise can be realized is an indicator of its financial stability.

An analysis of the financial performance of a business entity may provide an assessment of its creditworthiness. For this purpose, 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 a subject's ability to pay short-term obligations, due to the realization of his current assets.

Understand the level of creditworthiness of the enterprise is necessary to determine the ability to fully and in a timely manner settle for all of its obligations. The methodology for analyzing the ease of implementation of 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.