Question

Which one of the following statements concerning liquidity is correct?
A. If you can sell an asset in 18 months, it is a liquid asset.
B. If you can sell an asset next year at a price equal to its actual value, the asset is highly liquid.
C. Trademarks and patents are highly liquid.
D. The less liquidity a firm has, the lower the probability the firm will encounter financial difficulties.
E. Statement of financial position accounts are listed in order of decreasing liquidity.

Answer 1

Solution:

Which one of the following statements concerning liquidity is correct?

E. Statement of financial position accounts are listed in order of decreasing liquidity (Correct Option)

Reason : The Balance Sheet lists assets in descending order of liquidity, with the most liquid assets listed first. We show assets in decreasing order of liquidity. For example, if we have 3 current assets such as Inventory, Cash, and Account Receivable. In this case we will show as assets as below:-

1) Cash

2) Inventory

3) Accounts Receivable

Thanks

- Please give your valuable feedback and hit like..