An asset's liquidity measures its:
A)Potential for generating a profit
B)Cash requirements
C)Ease and cost of being converted to cash
D)Proportion of debt financing

Question

Quizplus · Accepted Answer

Liquidity refers to how easily and quickly an asset can be converted into cash without significantly affecting its market value. The ease and cost of converting an asset into cash are important aspects of liquidity as it determines how quickly the asset can help meet cash requirements. The potential for generating a profit (A) and proportion of debt financing (D) are not directly related to liquidity, while cash requirements (B) are a consequence of liquidity.

An Asset's Liquidity Measures Its