Definition of Liquid asset

Liquid asset

asset that is easily and cheaply turned into cash - notably cash itself and short-term securities.

Money supply

M1-A: Currency plus demand deposits
M1-B: M1-A plus other checkable deposits.
M2: M1-B plus overnight repos, money market funds, savings, and small (less than $100M) time deposits.
M3: M-2 plus large time deposits and term repos.
L: M-3 plus other liquid assets.

Short-term solvency ratios

Ratios used to judge the adequacy of liquid assets for meeting short-term
obligations as they come due, including
1) the current ratio,
2) the acid-test ratio,
3) the inventory turnover ratio, and
4) the accounts receivable turnover ratio.

Will

This is a legal document detailing how you want your assets to be distributed upon your death. You may also stipulate how you wish to be buried or who you would like to take care of any surviving dependent family members. In my opinion, it is very important to be quite specific about your wishes for the distribution of special assets such as the antique grandfather clock, the classic silver tea set or the antique piano. If you think that your beneficiaries may dispute how your things are to be distributed, consider stipulating that an auction be held in which all beneficiaries may bid on the item which they value and all moneys collected are then shared in the same manner in which you distributed your other liquid assets. Your might want to remember that a will is automatically revoked upon marriage unless the will specifically states that the will is made in contemplation of marriage.

Quick Ratio

The simple ratio of a company's liquid assets to current liabilities. Such assets include cash, marketable securities, and accounts receivable.

Accounting liquidity

The ease and quickness with which assets can be converted to cash.

Acquisition of assets

A merger or consolidation in which an acquirer purchases the selling firm's assets.

Asset

Any possession that has value in an exchange.

Asset/equity ratio

The ratio of total assets to stockholder equity.

Asset/liability management

Also called surplus management, the task of managing funds of a financial
institution to accomplish the two goals of a financial institution:
1) to earn an adequate return on funds invested, and
2) to maintain a comfortable surplus of assets beyond liabilities.

Asset activity ratios

Ratios that measure how effectively the firm is managing its assets.

Asset allocation decision

The decision regarding how an institution's funds should be distributed among the
major classes of assets in which it may invest.

Asset-backed security

A security that is collateralized by loans, leases, receivables, or installment contracts
on personal property, not real estate.

Asset-based financing

Methods of financing in which lenders and equity investors look principally to the
cash flow from a particular asset or set of assets for a return on, and the return of, their financing.

Asset classes

Categories of assets, such as stocks, bonds, real estate and foreign securities.

Asset-coverage test

A bond indenture restriction that permits additional borrowing on if the ratio of assets to
debt does not fall below a specified minimum.

Asset for asset swap

Creditors exchange the debt of one defaulting borrower for the debt of another
defaulting borrower.

Asset pricing model

A model for determining the required rate of return on an asset.

Asset substitution

A firm's investing in assets that are riskier than those that the debtholders expected.

Asset substitution problem

Arises when the stockholders substitute riskier assets for the firm's existing
assets and expropriate value from the debtholders.

Asset swap

An interest rate swap used to alter the cash flow characteristics of an institution's assets so as to
provide a better match with its iabilities.

Asset turnover

The ratio of net sales to total assets.

Asset pricing model

A model, such as the Capital asset Pricing Model (CAPM), that determines the required
rate of return on a particular asset.

Assets

A firm's productive resources.

Assets requirements

A common element of a financial plan that describes projected capital spending and the
proposed uses of net working capital.

Capital asset pricing model (CAPM)

An economic theory that describes the relationship between risk and
expected return, and serves as a model for the pricing of risky securities. The CAPM asserts that the only risk
that is priced by rational investors is systematic risk, because that risk cannot be eliminated by diversification.
The CAPM says that the expected return of a security or a portfolio is equal to the rate on a risk-free security
plus a risk premium.

Current assets

Value of cash, accounts receivable, inventories, marketable securities and other assets that
could be converted to cash in less than 1 year.

Dynamic asset allocation

An asset allocation strategy in which the asset mix is mechanistically shifted in
response to -changing market conditions, as in a portfolio insurance strategy, for example.

Exchange of assets

Acquisition of another company by purchase of its assets in exchange for cash or stock.

Financial assets

Claims on real assets.

Fixed asset

Long-lived property owned by a firm that is used by a firm in the production of its income.
Tangible fixed assets include real estate, plant, and equipment. Intangible fixed assets include patents,
trademarks, and customer recognition.

Fixed asset turnover ratio

The ratio of sales to fixed assets.

Intangible asset

A legal claim to some future benefit, typically a claim to future cash. Goodwill, intellectual
property, patents, copyrights, and trademarks are examples of intangible assets.

Involuntary liquidation preference

A premium that must be paid to preferred or preference stockholders if
the issuer of the stock is forced into involuntary liquidation.

Liquid yield option note (LYON)

Zero-coupon, callable, putable, convertible bond invented by Merrill

Liquidation

When a firm's business is terminated, assets are sold, proceeds pay creditors and any leftovers
are distributed to shareholders. Any transaction that offsets or closes out a Long or short position. Related:
buy in, evening up, offsetliquidity.

Liquidation rights

The rights of a firm's securityholders in the event the firm liquidates.

Liquidation value

Net amount that could be realized by selling the assets of a firm after paying the debt.

Liquidator

Person appointed by unsecured creditors in the United Kingdom to oversee the sale of an
insolvent firm's assets and the repayment of its debts.

Liquidity

A market is liquid when it has a high level of trading activity, allowing buying and selling with
minimum price disturbance. Also a market characterized by the ability to buy and sell with relative ease.

Liquidity diversification

Investing in a variety of maturities to reduce the price risk to which holding long
bonds exposes the investor.

Liquidity preference hypothesis

The argument that greater liquidity is valuable, all else equal. Also, the
theory that the forward rate exceeds expected future interest rates.

Liquidity premium

Forward rate minus expected future short-term interest rate.

Liquidity ratios

Ratios that measure a firm's ability to meet its short-term financial obligations on time.

Liquidity risk

The risk that arises from the difficulty of selling an asset. It can be thought of as the difference
between the "true value" of the asset and the likely price, less commissions.

Liquidity theory of the term structure

A biased expectations theory that asserts that the implied forward
rates will not be a pure estimate of the market's expectations of future interest rates because they embody a
liquidity premium.

Long-term assets

Value of property, equipment and other capital assets minus the depreciation. This is an
entry in the bookkeeping records of a company, usually on a "cost" basis and thus does not necessarily reflect
the market value of the assets.

Limitation on asset dispositions

A bond covenant that restricts in some way a firm's ability to sell major assets.

Liquid yield option note (LYON)

Zero-coupon, callable, putable, convertible bond invented by Merrill Lynch & Co.

Liquidating dividend

Payment by a firm to its owners from capital rather than from earnings.

Liquidity ratios

Ratios that measure a firm's ability to meet its short-term financial obligations on time.

Net asset value (NAV)

The value of a fund's investments. For a mutual fund, the net asset value per share
usually represents the fund's market price, subject to a possible sales or redemption charge. For a closed end
fund, the market price may vary significantly from the net asset value.

Net assets

The difference between total assets on the one hand and current liabilities and noncapitalized longterm
liabilities on the other hand.

Non-reproducible assets

A tangible asset with unique physical properties, like a parcel of land, a mine, or a
work of art.

Other current assets

Value of non-cash assets, including prepaid expenses and accounts receivable, due
within 1 year.

Policy asset allocation

A long-term asset allocation method, in which the investor seeks to assess an
appropriate long-term "normal" asset mix that represents an ideal blend of controlled risk and enhanced
return.

Publicly traded assets

assets that can be traded in a public market, such as the stock market.

Quick assets

Current assets minus inventories.

Real assets

Identifiable assets, such as buildings, equipment, patents, and trademarks, as distinguished from a
financial obligation.

Reproducible assets

A tangible asset with physical properties that can be reproduced, such as a building or
machinery.

Residual assets

assets that remain after sufficient assets are dedicated to meet all senior debtholder's claims in full.

Return on assets (ROA)

Indicator of profitability. Determined by dividing net income for the past 12 months
by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net
income/sales) multiplied by asset utilization (sales/assets).

Return on total assets

The ratio of earnings available to common stockholders to total assets.

Riskless or risk-free asset

An asset whose future return is known today with certainty. The risk free asset is
commonly defined as short-term obligations of the U.S. government.

Risky asset

An asset whose future return is uncertain.

Risk-free asset

An asset whose future return is known today with certainty.

Self-liquidating loan

Loan to finance current assets, The sale of the current assets provides the cash to repay
the loan.

Tactical Asset Allocation (TAA)

An asset allocation strategy that allows active departures from the normal
asset mix based upon rigorous objective measures of value. Often called active management. It involves
forecasting asset returns, volatilities and correlations. The forecasted variables may be functions of
fundamental variables, economic variables or even technical variables.

Tangible asset

An asset whose value depends on particular physical properties. These i nclude reproducible
assets such as buildings or machinery and non-reproducible assets such as land, a mine, or a work of art. Also
called real assets. Related: Intangible asset

Total asset turnover

The ratio of net sales to total assets.

Underlying asset

The asset that an option gives the option holder the right to buy or to sell.

Wasting asset

An asset which has a limited life and thus, decreases in value (depreciates) over time. Also
applied to consumed assets, such as gas, and termed "depletion."

ASSETS

Anything of value that a company owns.

Current assets

Cash, things that will be converted into cash within a year (such as accounts receivable), and inventory.

RATE OF RETURN ON TOTAL ASSETS

The percentage return or profit that management made on each dollar of assets. The formula is:
(Net income) / (Total assets)

Assets

Things that the business owns.

Current assets

Amounts receivable by the business within a period of 12 months, including bank, debtors, inventory and prepayments.

Fixed assets

Things that the business owns and are part of the business infrastructure – fixed assets may be
tangible or intangible.

Intangible fixed assets

Non-physical assets, e.g. customer goodwill or intellectual property (patents and trademarks).

Liquidity

A measure of the ability of a business to pay its debts as they fall due – see also working capital.

Tangible fixed assets

Physical assets that can be seen and touched, e.g. buildings, machinery, vehicles, computers etc.

Assets

Items owned by the company or expenses that have been paid for but have not been used up.

Contra-asset account

An offset to an asset account that reduces the balance of the asset account.

Intangible assets

assets owned by the company that do not possess physical substance; they usually take the form of rights and privileges such as patents, copyrights, and franchises.

Liquidity

A term that means nearness to cash; the closer an asset is to becoming cash or a liability is to using cash, the more liquid that asset or liability is.

asset turnover ratio

A broad-gauge ratio computed by dividing annual
sales revenue by total assets. It is a rough measure of the sales-generating
power of assets. The idea is that assets are used to make sales, and the
sales should lead to profit. The ultimate test is not sales revenue on
assets, but the profit earned on assets as measured by the return on
assets (ROA) ratio.

current assets

Current refers to cash and those assets that will be turned
into cash in the short run. Five types of assets are classified as current:
cash, short-term marketable investments, accounts receivable, inventories,
and prepaid expenses—and they are generally listed in this order in
the balance sheet.

fixed assets

An informal term that refers to the variety of long-term operating
resources used by a business in its operations—including real
estate, machinery, equipment, tools, vehicles, office furniture, computers,
and so on. In balance sheets, these assets are typically labeled property,
plant, and equipment. The term fixed assets captures the idea that the
assets are relatively fixed in place and are not held for sale in the normal
course of business. The cost of fixed assets, except land, is depreciated,
which means the cost is allocated over the estimated useful lives of the
assets.

return on assets (ROA)

Although there is no single uniform practice for
calculating this ratio, generally it equals operating profit (before interest
and income tax) for a year divided by the total assets that are used to
generate the profit. ROA is the key ratio to test whether a business is
earning enough on its assets to cover its cost of capital. ROA is used for
determining financial leverage gain (or loss).

Asset-specific Risk

The amount of total risk that can be eliminated by diversification by
creating a portfolio. Also known as company-specific risk or
unsystematic risk.

Capital Asset Pricing Model (CAPM)

A model for estimating equilibrium rates of return and values of
assets in financial markets; uses beta as a measure of asset risk
relative to market risk

Fixed Assets Turnover Ratio

A measure of the utilization of a company's fixed assets to
generate sales. It is calculated by dividing the sales for the period
by the book value of the net fixed assets.

Liquidation Value

The net proceeds (after taxes and expenses) of selling the assets
of a company at fair market prices

Liquidity

The ease with which assets or securities can be sold for cash on
short notice at a fair price

Return on Total Assets Ratio

A measure of the percentage return earned on the value of the
assets in the company. It is calculated by dividing the net income
available for distribution to shareholders by the book value of all
assets.

Total Asset Turnover Ratio

A measure of the utilization of all of a company's assets to
generate sales. It is calculated by dividing the sales figure for the
period by the book value of the net fixed assets.

Total Debt to Total Assets Ratio

See debt ratio

asset turnover

a ratio measuring asset productivity and showing the number of sales dollars generated by each dollar of assets

capital asset

an asset used to generate revenues or cost savings
by providing production, distribution, or service capabilities
for more than one year

Asset

A resource, recorded through a transaction, that is expected to yield a benefit to a
company.

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