Question

Which of the following assets is likely to be considered the most liquid?

A. Marketable securities

B. Net fixed assets

C. Accounts payable

D. Inventories

Answer 1

Here, option (a) is the correct answer. The Marketable securities represents the most liquid asset among the group

Marketable securities are liquid financial instruments that can be quickly converted in to cash at a reasonable price. The maturity period of such a security is less than a year and the rate at which they can be bought or sold have only a little effect on the prices. These short-term securities can be either bought or sold on a public exchange or a public bond exchange. They include common stock, treasury bills, money market instruments etc. They are defined under the category of unrestricted financial instruments.

Net fixed assets represents the purchase price of all fixed assets including land, building, equipment, machinery, vehicles etc. since it is a group representing fixed assets, it is expected to be less liquid in the given set of options

Accounts payable represents the money owned by a company to its creditors. They are shown as a liability in the balance sheet of the company. It represents a form of credit that the suppliers offer to their customers by allowing them to pay for a product or a service which has already been received.

An inventory is a representation of complete list of items such as property, goods in stock, contents of building etc. It is a term for the goods available for sale and raw materials used to produce goods available for sale The turnover of the inventory represents one of the primary sources of revenue generation and subsequent earnings of the shareholder’s of the company.