Liquidity is:
A)a measure of the use of debt in a ﬁrm's capital structure.
B)equal to current assets minus current liabilities.
C)equal to the market value of a ﬁrm's total assets minus its current liabilities.
D)valuable to a ﬁrm even though liquid assets tend to be less proﬁtable to own.
E)generally associated with intangible assets.

Question

Quizplus · Accepted Answer

Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its value. Liquid assets are valuable to a firm because they provide the flexibility to meet short-term obligations and take advantage of immediate opportunities, even though they may offer lower returns compared to more illiquid, long-term investments.

Liquidity Is