Guest Column: What is Liquidity?

The Bottom Line- Monthly Accounting Advice for Better Business- June 2009
Brought to you by Capital Bookkeeping

What is Liquidity?

The term describes how readily an asset can be converted to cash with minimal price fluctuations. A highly liquid asset has good marketability, meaning there are many willing buyers and sellers. Cash is the most liquid asset. Money market funds, CD’s, savings accounts and similar short-term investments are quite liquid as well. High liquidity may decrease profitability (cash and its equivalents traditionally earn little income) but will increase a company’s flexibility. When we invest in any assets, we need to keep their liquidity levels in mind because it can be difficult or time consuming to convert certain assets back into cash. And in a time of an emergency or cash crunch this is a real problem.

Capital Bookkeeping is a CWCC member, as well as the bookkeeping firm for the CWCC. Donna Evans, Chamber President, says “I highly recommend Capital Bookkeeping and encourage you to contact Karin. We are thrilled with their work and our relationship with them.” Let Capital Bookkeeping handle your bookkeeping so you can do what you do best- focus on running your business.

Contact Capital Bookkeeping Owner Karin Lichtenstein at 720-200-5025 or email her at Karin@capitalbookkeeping.com. Visit the website at www.capitalbookkeeping.com.

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