Liquid asset

A liquid asset is any asset that is readily convertible into cash within a short period of time, and which suffers no loss in value as a result of the conversion. Convertibility is assisted by the presence of a large market in which there are many participants, and in which it is easy to transfer ownership from the buyer to the seller. Examples of liquid assets are:

  • Marketable securities
  • Accounts receivable
  • Life insurance policies with cash surrender values
  • Precious metals

A business that has a large proportion of liquid assets on its balance sheet is better able to pay for its obligations in a timely manner, and so is considered a good credit risk.