Liquidity is a measure of the ability of a company to convert assets into cash or equivalents without significant loss. This is an important metric because a company with no liquid assets could quickly fall into cash-flow issues. It’s important to note that Accounts Receivable is seen as a liquid asset. I’d argue that yes, this is liquid in good times, but when an entire market or economy is down, bankruptcies can effect a company’s ability to convert receivables to cash.
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