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Market liquidity. In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity involves the trade-off between the price at which an asset can be sold, and how quickly it can be sold.
Cash and cash equivalents. (CCE) are the most liquid current assets found on a business's balance sheet. Cash equivalents are short-term commitments "with temporarily idle cash and easily convertible into a known cash amount". [1] An investment normally counts as a cash equivalent when it has a short maturity period of 90 days or less, and can ...
Liquidity is a prime concern in a banking environment and a shortage of liquidity has often been a trigger for bank failures. Holding assets in a highly liquid form tends to reduce the income from that asset (cash, for example, is the most liquid asset of all but pays no interest) so banks will try to reduce liquid assets as far as possible.
Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: Market liquidity, the ease with which an asset can be sold. Accounting liquidity, the ability to meet cash obligations when due. Liquid capital, the amount of money that a firm holds. Liquidity risk, the risk that an asset will have ...
Liquidity crisis. In financial economics, a liquidity crisis is an acute shortage of liquidity. [ 1 ] Liquidity may refer to market liquidity (the ease with which an asset can be converted into a liquid medium, e.g. cash), funding liquidity (the ease with which borrowers can obtain external funding), or accounting liquidity (the health of an ...
In management accounting, the Cash conversion cycle (CCC) measures how long a firm will be deprived of cash if it increases its investment in inventory in order to expand customer sales. [1] It is thus a measure of the liquidity risk entailed by growth. [2] However, shortening the CCC creates its own risks: while a firm could even achieve a negative CCC by collecting from customers before ...
A liquidity trap is a situation, described in Keynesian economics, in which, "after the rate of interest has fallen to a certain level, liquidity preference may become virtually absolute in the sense that almost everyone prefers holding cash rather than holding a debt (financial instrument) which yields so low a rate of interest." [1] A liquidity trap is caused when people hold cash because ...
Financial ratios quantify many aspects of a business and are an integral part of the financial statement analysis. Financial ratios are categorized according to the financial aspect of the business which the ratio measures. Liquidity ratios measure the availability of cash to pay debt. [2] Activity ratios measure how quickly a firm converts non-cash assets to cash assets. [3] Debt ratios ...