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Question

Cash is the most liquid assets; explain why.

Answer 1

Liquid means the convertibility to cash. Cash is already cash, so it is the most liquid one.

Accounts receivable, to convert into cash, you have to collect. it will take time to collect. So in terms of liquidity, A/R is later than cash. Financial assets, for example, stock (equity security) is easy to convert, its fair value is known. But it's later than cash (but faster than A/R), as it takes time to settle.