Consider the following assets:
(i) Bills of Exchange
(ii) Cash and other operational balances
(iii) Money at call
(iv) Reverse repos
(v) Government bonds (1 to 5 years)
(vi) Advances
Which list shows the correct order of these assets in ascending order of liquidity (i.e. the least liquid asset first)?

Question

Quizplus · Accepted Answer

Liquidity refers to how quickly and easily an asset can be converted into cash. Advances (vi) are typically the least liquid as they are loans that may have a fixed term. Government bonds (v) are more liquid but less so than some other assets due to their longer-term nature. Bills of Exchange (i) can be more liquid, depending on their terms. Reverse repos (iv) are agreements to purchase securities and sell them back at a higher price, which can be quite liquid. Money at call (iii) is very liquid as it can be called upon at very short notice. Cash and other operational balances (ii) are the most liquid assets as they are already in cash form or can be quickly converted to cash.

Consider the Following Assets