The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets. Introduction: The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

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Answer 1

Question

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

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Students have asked these similar questions

Esfandairi Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2,350,000. The fixed asset will be depreciated straight-line to zero over its three-year tax life, after which time it will be worthless. The project is estimated to generate $3,310,000 in annual sales, with costs of $2,330,000. Assume the tax rate is 23 percent and the required return on the project is 11 percent. What is the project's NPV? Note: A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.

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Answer 2

Question

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

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Answer 3

Question

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

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Answer 4

Question

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

Answer 6

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.

Conclusion

Characteristics of liquid assets are that they can be converted into cash easily; less risk associated and provides less rate of return.

Answer 7

Chapter 5, Problem 1PA

Summary Introduction

To discuss:

The characteristics of liquid assets and disadvantages of having too much or too little money as liquid assets.

Introduction:

The Liquid assets imply that the assets which are readily available to be converted into cash. Examples Cash balance, Bank balance, Account receivables, Fixed deposits, Demand deposits.

Answer 8

Expert Solution & Answer

Explanation of Solution

Characteristics of liquid assets are as follows:

These assets can be quickly converted into cash with no loss or a minimum loss in value.
These assets provide a lower rate of return.
These assets have less risk associated with them.

Disadvantages of having too much money are as follows:

Too much money in liquid assets limits the opportunity of growth.
Return, which is the most important part, is less because of less investment risk.
It increases the risk of extra-spending because of easy access.

Disadvantages of having less money:

In cases of emergency, there will be shortage of funds.
There will be loss due to sale of long term investments on unfavorable price in the case of emergency.