What are liquid assets?
Liquid assets are important elements in financial planning and investing. They serve as key tool for financial planners to analyze potential net or profit within a given period by monitoring the accessible funds of an individual. Through liquid assets financial investors are also able to demonstrate and predict the rise and fall of financial markets and banking sectors. Some examples of liquid assets include available cash on hand, funds under a checking or savings account, deposits, mutual funds, stocks, and bonds.
Liquid assets may be divided into three main categories: short selling investments, current accounts, and petty cash floats. Short selling investment includes buying a share of stock, making an individual a co-owner of an interest in a company. Although it is one of the most common types of investment, it is very risky as stocks may depreciate in the future. Current account is the resulting amount of money when net income from abroad and net current transfers is added together, less the money from imports. It may change depending on trade policies, forex reserves, and inflation. As part of the nation’s savings and investment, current account helps auditors determine whether or not a country’s economy is flourishing. Petty cash float is a type of imprest financial system wherein money is reserved for a specific period. It may be withdrawn anytime but needs to be replenished when the minimum balance required is reached. This is to avoid closure of the petty cash float.
Liquid assets are very crucial that they need to be protected and well managed. The objective in safeguarding liquid assets is to prevent loss, ensure that adequate liquidity is being maintained on a regular basis, and grow surplus cash profitability. Taking care of liquid assets is also a good practice in business. In an event when a business losses its liquid assets there is a high tendency that it may suffer huge loss or bankruptcy.