Liquidity
- Dennis Daggett (Deactivated)
A theoretical measure of the relative length of time expected to elapse until (i) an asset can be converted into cash or (ii) a liability has to be paid with cash. However, for reasons of practicality, liquidity is measured not by units of time, but by simply comparing cash, near cash assets, or all current assets to current liabilities of a business for the purpose of assessing the ability of the business to meet current and maturing obligations as they come due in the ordinary course of business and without disrupting the normal operation of the business. Such a measure for liquidity is not only practical, but also theoretically sound because, by definition, current assets and current liabilities both have a one-year time horizon by when they are to be converted to cash (for current assets) or satisfied (for current liabilities). (II-5, 14, 45; III-1, 5, 7)
Authorization Path: 2.2.5.2.43.1