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)generally associated with intangible assets.
E)valuable to a firm even though liquid assets tend to be less profitable to own.

Question

Quizplus · Accepted Answer

Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its market price. 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 tend to offer lower returns compared to investments in less liquid, long-term assets.

Liquidity Is