What is a liquid asset?

A liquid asset is cash on hand or an asset that can be easily converted to cash. In terms of liquidity, cash is supreme since cash as legal tender is the ultimate goal. Assets can then be converted to cash in a short time are similar to cash itself because the asset holder can quickly and easily get cash in a transaction exchange.

What is considered a non-liquid asset?

Land, real estate investments, equipment, and machinery are considered types of non-liquid assets because they take time to convert to cash, costs can be incurred to convert them to cash, and they may not convert to cash at all. Examples of liquid assets held by both individuals and businesses include:

Can a liquid asset be converted to cash quickly?

A liquid asset can be converted to cash quickly. The more difficult or time consuming it is to sell an asset, the less liquid the asset is — otherwise known as illiquid. Collins says an illiquid asset is something that requires at least some leg work to exchange for cash: "An illiquid asset would be anything I need to find a buyer for.

What are illiquid assets?

As a result, illiquid assets tend to have lower trading volume, wider bid-ask spreads, and greater price volatility. Illiquidity is the opposite of liquidity . Illiquidity occurs when a security or other asset that cannot easily and quickly be sold or exchanged for cash without a substantial loss in value.