You can determine your liquid net worth by taking the total sum of your liabilities and subtracting that from the total sum of your liquid assets. Once you’ve calculated the current ratio, you can draw inferences about the company. It is simply calculated by dividing a company’s total assets (cash and easily convertible assets) by its short-term debts (accounts payable for the year). These are the company’s “quick” assets, giving the quick ratio its name. The quick ratio, then, is defined as the ratio of all liabilities due within the next year measured against all liquid assets or revenue due within the next year.Īnother is the current ratio. It compares a company’s current assets to the debts that it will have to pay within the year. Cash-like assets are traditionally defined as liquid properties that the company can easily sell off, such as stocks, or near-term revenue, such as accounts due for collection. In this case “cash” is defined as either actual cash or cash-like assets which can quickly be converted. It measures how well a company can meet its short-term liabilities (such as debt payment, payroll, inventory costs, etc.) with its cash on hand. There are two key metrics for gauging liquid assets, both of which are common for businesses to use but have applicability for individuals. Though there is some debate about this some people also regard as liquid accounts receivable, stocks, mutual funds, bonds and any other securities that can be quickly turned into cash. Examples of liquid assets include cash, money market accounts, checking accounts and savings accounts. Liquid assets represent any cash or assets that can be readily converted to cash. The liabilities for a business you own should not be calculated into your personal net worth. These might include student loans, car loans, credit card balances, taxes or mortgages. Liabilities are financial debts one must pay. You’ll have a positive net worth if your assets have more monetary value than your liabilities.

If your liabilities exceed your assets, you’ll have a negative net worth. You’ll then subtract the value of your liabilities from this sum. This means you’ll have to add up the value of all your assets, including vehicles, property, retirement accounts, securities, cash and anything else of monetary value. Your total net worth, however, is affected by both liquid and non-liquid assets. It’s quite similar to net worth, but the only difference is that it doesn’t account for non-liquid assets such as real estate or retirement accounts. Liquid net worth is the amount of money you’ve got in cash or cash equivalents after you deducted your liabilities from your liquid assets.

Liquid definition