Quiz 27 – Liquid Assets – (Answers)

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  • Name – Quiz 27 – Liquid Assets – (Answers)
  • Topic – Liquid Assets
  • Answers with Explanation


Q1. A firm incurs loss when liquid assets are converted into cash.

Ans. The given statement is False. Liquid assets, when converted into cash have a negligible effect on the price, so there is no loss or insignificant loss.


Q2. If Inventory = 0 & Prepaid Expenses = 0, then Liquid assets = _____.

Ans. Liquid assets are current assets less inventory & prepaid expenses. So when inventory & prepaid expenses are nil then ‘current assets ‘ will be equal to the ‘liquid assets’.


Q3. Cash = 500, Inventory = 100, Receivables = 300, Quick Assets = _____.

Ans. In this case, Quick Assets = Cash + Receivables = 500 + 300.


Q4. Liquid assets are also known as _____.

Ans. They are also known as quick assets because they can be quickly converted into cash.


Q5. _____ is considered the most liquid asset.

Ans. Cash is the most liquid as cash/money is the legal tender which can easily be used to pay dues.


Q6. Investments are not considered liquid assets.

Ans. The given statement is False. Some investments are considered ‘liquid assets’ e.g. shares.


Q7. Which of the following is a liquid asset?

Ans. Cash is the most liquid form of asset for a firm regardless of where is it stored.


Q8. Mutual funds are considered liquid assets.

Ans. The given statement is True. Mutual funds can be converted into cash easily, so they are liquid. (Except the ones which are locked for a few years and cannot be redeemed such as tax-saving MFs)


Q9. Liquid Assets = Current Assets – Inventory – _____.

Ans. Inventory and prepaid expenses cannot be converted into cash instantly therefore they are not liquid assets.


Q10. _____ is not a liquid asset.

Ans. Inventory is not a liquid asset from this list.


Q11. Liquid assets can very easily be converted into _____.

Ans. Liquidity is the ability of an asset to be converted into cash quickly.