## Liquidity Solution

STEP 0: Pre-Calculation Summary
Formula Used
Liquidity = (Liquid Assets+Accounts Receivable+Stock)/Short Term Payables
LY = (LA+AR+S)/STP
This formula uses 5 Variables
Variables Used
Liquidity - Liquidity refers to the ease with which an asset or security can be bought or sold in the market without significantly affecting its price.
Liquid Assets - Liquid Assets refer to assets that can be easily converted into cash or are already in the form of cash.
Accounts Receivable - Accounts Receivable refers to the money owed to a business by its customers for goods or services that have been rendered but not yet paid.
Stock - Stock also known as equity or shares, represents ownership in a corporation.
Short Term Payables - Short Term Payables refer to the obligations that a company owes to its creditors or suppliers that are expected to be settled within a relatively short period, typically within one year or less.
STEP 1: Convert Input(s) to Base Unit
Liquid Assets: 2500 --> No Conversion Required
Accounts Receivable: 1750 --> No Conversion Required
Stock: 2700 --> No Conversion Required
Short Term Payables: 2200 --> No Conversion Required
STEP 2: Evaluate Formula
Substituting Input Values in Formula
LY = (LA+AR+S)/STP --> (2500+1750+2700)/2200
Evaluating ... ...
LY = 3.15909090909091
STEP 3: Convert Result to Output's Unit
3.15909090909091 --> No Conversion Required
3.15909090909091 3.159091 <-- Liquidity
(Calculation completed in 00.004 seconds)
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## Credits

Created by Aashna
IGNOU (IGNOU), India
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Verified by Vishnu K
BMS College of Engineering (BMSCE), Bangalore
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## Liquidity Formula

Liquidity = (Liquid Assets+Accounts Receivable+Stock)/Short Term Payables
LY = (LA+AR+S)/STP

## What do you mean by Liquidity ?

Liquidity is the degree to which a security can be quickly purchased or sold in the market at a price reflecting its current value. Highly liquid assets are easily traded and converted into cash with minimal impact on their market price. Examples of highly liquid assets include cash, stocks of large companies traded on major stock exchanges, and government bonds. On the other hand, less liquid assets may take longer to sell or may incur higher transaction costs, and selling them could potentially affect their market price. Examples of less liquid assets include real estate, certain types of stocks in smaller companies, and some types of bonds. Liquidity is an important consideration for investors and financial institutions because it affects the ease with which they can access funds or adjust their investment portfolios. In general, assets with higher liquidity tend to be more desirable because they offer greater flexibility and lower risk of loss due to market fluctuations.

## How to Calculate Liquidity?

Liquidity calculator uses Liquidity = (Liquid Assets+Accounts Receivable+Stock)/Short Term Payables to calculate the Liquidity, Liquidity measures the ease with which an asset can be converted into cash without causing a substantial change in its value. Liquidity is denoted by LY symbol.

How to calculate Liquidity using this online calculator? To use this online calculator for Liquidity, enter Liquid Assets (LA), Accounts Receivable (AR), Stock (S) & Short Term Payables (STP) and hit the calculate button. Here is how the Liquidity calculation can be explained with given input values -> 3.159091 = (2500+1750+2700)/2200.

### FAQ

What is Liquidity?
Liquidity measures the ease with which an asset can be converted into cash without causing a substantial change in its value and is represented as LY = (LA+AR+S)/STP or Liquidity = (Liquid Assets+Accounts Receivable+Stock)/Short Term Payables. Liquid Assets refer to assets that can be easily converted into cash or are already in the form of cash, Accounts Receivable refers to the money owed to a business by its customers for goods or services that have been rendered but not yet paid, Stock also known as equity or shares, represents ownership in a corporation & Short Term Payables refer to the obligations that a company owes to its creditors or suppliers that are expected to be settled within a relatively short period, typically within one year or less.
How to calculate Liquidity?
Liquidity measures the ease with which an asset can be converted into cash without causing a substantial change in its value is calculated using Liquidity = (Liquid Assets+Accounts Receivable+Stock)/Short Term Payables. To calculate Liquidity, you need Liquid Assets (LA), Accounts Receivable (AR), Stock (S) & Short Term Payables (STP). With our tool, you need to enter the respective value for Liquid Assets, Accounts Receivable, Stock & Short Term Payables and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.
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