Question

1)What does it mean to list assets according to liquidity? Give examples.
2)What are the two major forms of debt financing available to a firm? Give expamples

Answer 1

1]

In a balance sheet, the assets are listed in the order of their liquidity, the most liquid assets being listed first, and the least liquid assets being listed last.

Liquidity is a measure of how quickly an asset can be converted into cash without significant loss in value.

Thus, in a balance sheet, assets are usually listed in the following order :

• Cash and cash equivalents
• Inventory
• Receivables
• Prepaid expenses
• Fixed assets
• Intangibles
• Goodwill

2]

Two major forms of debt financing are bank loans and bonds.

A bank loan is debt financing obtained from a bank.

Bonds are debt financing obtained by issuing debt securities to the public