Liquidity plays a vital role to control inflation because it depends mostly on liquidity. The funds that you have collected become useless when you cannot access it at the hour of your need. There are liquid assets such as savings accounts, cash that can be converted into cash easily.
Among the assets, cash is the most liquid asset. The assets such as fine art, real estate, and collectables are considered less liquid assets. The transformation of assets into cash happens through liquidity ratios.
Different Kinds of Liquid Assets
The different types of liquid assets are discussed in our Liquidity assignment help firm as follows:
Cash: This is the total amount of money that is accessed as a liquid asset. Cash is considered as a liquid asset because it can be withdrawn to settle obligations any time.
Cash Equivalents: They are highly liquid investments that have maturity ranging for 3 months. It has good credit quality and can be used immediately because there are no restrictions. Some examples are treasury bills, commercial papers, and others.
Stocks: Stocks are considered liquid because they have a huge number of sellers and buyers. You can sell your stocks through electronic means. As per the demand, business or an individual can convert equity into cash.
Accrued Income: It is the income that has been earned already, however, the amount is not deposited in the account. Delayed income can come any day thus making it a good source of funding.
Government Bonds: Government raise funds through bonds wherein investors extend loans to governments through debt instruments against interest rates. These bonds are fixed-income assets, Investors receive the original investment at the date of maturity. Government bonds should be held or traded in open markets.