Maria has $ 5,000 in her checking account, a house with a market value of $...

Maria has $ 5,000 in her checking account, a house with a market value of $ 155,000 and shares valued at $ 8,000. She also owes $ 5,000 on her credit card. Maria's liquidity index is:

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Expert Solution

Balance in checking account = 5,000 | Market value of house = 155,000 | Shares held = 8,000

Credit card debt = 5,000

For Liquidity index, we only consider those assets which can be converted to cash easily. This is same as Quick ratio for a company.

Liquidity index = (Cash + Marketable securities) / Short-term Debt

Liquidity index = (5000 + 8000) / 5000

Liquidity index = 13,000 / 5,000

Liquidity index = 2.6

Hence, Maria's Liquidity index is 2.6

jeff jeffy answered 2 years ago

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