Liquidity is
A) how quickly Accounts Payable can be paid.
B) how easily an asset can be converted to cash.
C) how much cash a company has on its balance sheet.
D) None of the above are correct.

Question

Quizplus · Accepted Answer

Liquidity refers to how easily an asset can be converted to cash, which is important for a company's ability to meet its financial obligations in a timely manner. Options A and C are not comprehensive enough to capture the concept of liquidity, as liquidity pertains not only to a company's ability to pay its debts or the amount of cash on hand, but also to the ease with which assets can be turned into cash. Option D is incorrect because one of the options (B) is correct.

Liquidity Is