Choose ONE (1) question below to discuss and then respond to TWO (2) of your classmates answers (Try not to repeat others answers). Include the question with your response.

1. Why is it important to hold some liquid and some illiquid assets?
2. Discuss one of the liquidity ratios in this week’s course content? Using the 2014 data for Holy Cross in this week’s Power Point summary slides, what is the 2014 ratio you identified? Given information provided what is your interpretation of this ratio?
3. Discuss the formula used for a ratio to measure leverage or capital structure? What exactly does this ratio measure?
4. Identify two operating indicators and explain how they may supplement a ratio analysis using financial data.  How would you interpret the operating indicators?

Make sure you are properly citing your source(s) and providing your reference(s) for information you obtain from another source. Please review the Discussion Expectations and Grading posting if you have any questions regarding answering the discussion question and/or responding to your peers.

SOLUTION

Maintaining a balance of liquid and illiquid assets is critical for both individuals and businesses because it promotes financial flexibility and long-term wealth growth. Liquid assets, such as cash or short-term investments, can be turned into cash with little to no loss of value. Illiquid assets, on the other hand, are those that cannot be easily sold or swapped for cash without incurring significant losses, such as real estate, long-term investments, or specialist equipment. Financial flexibility is one of the most important reasons for having liquid assets. Liquid assets serve as a cushion for an organization or individual, allowing them to satisfy short-term obligations, cover emergencies, and exploit unforeseen opportunities without incurring financial hardship (Howell & Howell, 2020). For firms, having liquid assets readily available is critical for day-to-day operations. Liquid assets generate rapid cash flow, allowing a corporation to pay operating expenses like salaries, rent, and utilities without affecting operations.

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