Liquid assets are the type of assets that can be easily and quickly converted into cash with no impact on their value. Generally, liquid assets are seen in the same way as cash because their value is more or less the same when they are sold. To fit the standard criteria of a liquid asset, an asset should be available in an established market with a large pool of interested buyers, and it must have the characteristic of easy transferability. Liquid assets are used by both individuals and business corporations, and some types of liquid assets are cash, savings accounts, money market accounts, and checking accounts, which are also known as cash equivalents. Stocks and government bonds or marketable securities are some other types of liquid assets.

1. On the balance sheet
It is important to note that just as other types of assets are listed on the balance sheet of a company, liquid assets are also listed relative to their levels of liquidity. This means the assets with higher liquidity are placed on top, while the least liquid ones are at the bottom. While it would be difficult to measure the exact liquidity of each asset, analysts and experts use several strategies like quick ratio and cash ratio to judge the liquidity of a company.

2. The significance of liquid assets
In the world of business, liquidity is key to ensuring that a company can meet its operating expenses and does not sink. The liquid assets of a company are also used as reserves in case of any untoward financial emergency like a sudden recession, wherein the market prices of commodities fall, or market slowdowns where consumer demand is low and products and services are not selling well. The liquid assets of a company also help it to get further rounds of financing.

We should also think about the importance of the different types of liquid assets in our personal lives; these assets should not be excluded from any personal investment portfolio. These cash reserves come in handy to meet financial needs during emergencies and can also be used to hedge your position against any unexpected or adverse events.

3. Liquid versus illiquid markets
The stock market where equitable securities are traded in electronic format with a large number of buyers and sellers is considered liquid. It should be noted that liquidity is entirely dependent on the security, the volume of the transaction, and the market capitalization. Illiquid markets consist of assets that may be harder to liquidate and get the market price easily and quickly. For example, in the real estate market, a person who has debt obligations may have to sell their property at a lower rate, which has ramifications on the real estate market as a whole. Bonds and long-term securities are also illiquid even though they may be traded. In illiquid markets, a certain premium is payable, which means the yield and return should match this risk.