Liquid assets are those which can be converted into cash quickly and easily which implies that if a company wants money at short notice then it can use these and resolve the cash crunch problem. Given below are some of the liquid assets examples –
- Debtors – They represent those person or companies who have taken goods from the company on credit and have not paid for the goods purchased hence they are considered as debtors
- Bills Receivables – It is a document given by the debtors to the company promising to pay the amount which is due on a specified date.
- Cash in Hand – It represents the free available cash which is lying with the firm in the office or at some other place earning no interest.
- Cash at bank – It represents that cash which is lying in the bank account of the firm; it may be in the saving or current account of the firm.
- Short term investments – All companies do investments because no company would want idle cash in the books, however if the company does not want to lock its funds then they go for short term investments which can be liquidated quickly like gold, mutual fund, treasuries etc…
- Accrued income – Sometimes organization complete the work but they are not paid instantly rather they are paid after some time and such payments which the company receive after sometime are called accrued incomes.