Liquid assets are basically assets that can be converted into cash easily in a short span of time. So, there can be different types of liquid assets like marketable securities, money-market instruments, and cash. Regardless of whether you own a business, your net worth will include these liquid assets. So, for financial accounting purposes, the liquid assets of any enterprise must be a part of its balance sheet.

Liquid assets are similar to cash since the one who owns these can easily acquire cash through a transaction. This explains why these assets are usually viewed as cash, popularly called cash equivalents, as they can be exchanged seamlessly. But there are some conditions that must be satisfied for an asset to become a liquid asset. The asset must be in a liquid market containing many readily-available buyers. The transfer of ownership has to be secure, although the conversion time may differ.

What are some examples of liquid assets?
Different types of liquid assets are extremely vital for businesses and individuals as they will be the primary source of cash for making payments.

• The stock market, which has a huge number of buyers and sellers, is the ideal kind of liquid market. Since these assets have great trading volume, equitable securities can be quickly converted into cash. This is true of stocks that have high share volume. As securities may be sold via electronic markets when these are in demand, the equitable stocks can be viewed as a liquid asset.
• Another type of liquid asset is cash on hand; this is because it can be obtained quickly. Cash is held as the best asset that may be used by a business to resolve its liabilities. So, if a business or individual has cash locked away in a savings account, it can be withdrawn easily to settle any liability.
• Investments are also examples of liquid assets since these may be liquidated easily. So, mutual funds, bonds, or other shares may be liquid assets as they can be converted into cash whenever they are required in an emergency.

So, cash in the bank or at hand, marketable securities, accounts receivables, loans, advances, and other cash equivalents, short and long term investments are all types of liquid assets. Current assets will include these and prepaid expenses and inventories.

Liquid assets are necessary for any company or individual to own as these will prove very handy where you need to make emergency payments for debt, buy new equipment or hire additional labor, pay taxes and such other requirements. This is why any enterprise that is going to be launched or an individual that needs to invest requires access to immediate cash. And you can get this only by having liquid assets like marketable securities and readily-available cash that can be liquidated without hassles.

The value of liquidity is immense and it can help in keeping your business afloat for many months simply by using cash reserves. So, liquidity is very necessary, as it works as your safety net.