Net Liquid Assets
What are Net Liquid Assets?
Net liquid assets are cash and securities that can be converted to cash quickly, minus current liabilities.
How Do Net Liquid Assets Work?
The formula for net liquid assets is:
Net Liquid Assets = Cash + Marketable Securities - Current Liabilities
note that current liabilities are liabilities due within the next 365 days.
For example, let's assume that Company XYZ has $1 million in cash on its balance sheet, $300,000 in marketable securities, and $2 million of current liabilities. Using the formula above, Company XYZ's net liquid assets are:
$1,000,000 + $300,000 - $2,000,000 = -$700,000
In this example, Company XYZ has negative liquid assets, meaning that if it was forced to pay off all of its current liabilities today, it would not be able to do so.
Why Do Net Liquid Assets Matter?
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.
Read This Next
