Accounting Liquidity

Accounting Liquidity Concept

The expression Accounting Liquidity designates the quickness or easiness with which the assets detained by an entity can be converted in payment method. For example, the current assets (products stocks, debts own by customers, etc.) are faster converted into payment methods than the fixed or tangible assets (facilities, equipments, etc.). The bigger the quantity of high liquidity assets the company owns, lower will be the probability of not being able to honor to honor its financial commitments near third parties. However, high liquidity assets usually present a lower capacity to generate high returns for that investment decisions should always include the compliance risk analysis of financial commitments and the profitability analysis generated by these assets.

To evaluate the liquidity level of a certain company can be calculated several liquidity indicators, whose compare the value of certain assets groups with certain liquidity levels with liabilities with lower chargeability deadlines.

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