Question

What does it mean when you say current assets are liquid so they can be converted to cash quickly. For example with marketable securities how can a treasury bond be converted to cash fast?

Answer 1

ANSWER: Liquidity means how easily can be converted into cash, with negligible effect on the price available in the entire market. Assets such as bonds and stocks are very liquid because these can be converted to cash within days. But large assets such as property, plant, and equipment are not liquid as these can't be easily converted to cash. Marketable securities are financial instruments which can be converted to cash rapidly, such as government bonds, treasury bills, stocks, and certificates of deposit. Treasury bills are short term securities with maturity of less than one year; and are issued in small denominations