Liquid assets definition including break down of areas in the definition. Analyzing the definition of key term often provides more insight about concepts. Liquid assets can be defined as: Resources such as cash that are easily converted into other assets or used to pay for good, services, or liability. When thinking about liquid assets we often think in degrees of liquidity, comparing more liquid assets to less liquid assets, comparing the liquidity of all assets to that of cash. Cash is generally the most liquid asset because it can most easily exchanged for goods and services. We can compare the liquidity of other asset to cash be considering how close to cash they are or how soon, or easily they can be converted to cash or consumed to help generate revenue. Accounts receivable is a relatively liquid asset because it is assumed to be converted to cash in a short period of time. Property plant and equipment is not very liquid. There is often a tradeoff between liquidity and use for the business. We like the versatility of liquid assets like cash but need the use on non-liquid assets like property plant and equipment.
