What is the liquidity of a financial asset. Liquidity - what is it in simple words. Liquidity, profitability and solvency: debriefing

liquidity

in business terminology, the ability to convert the company's assets, values ​​into cash, the mobility of assets;

the ability of the borrower to ensure the timely fulfillment of debt obligations; solvency;

the ability of the market to absorb securities, the measure of their sales at the existing price level, without their significant change;

in the broad sense of the word - efficiency, effectiveness.

Glossary of financial terms

LIQUIDITY

the mobility of the assets of enterprises, firms, banks, which implies the possibility of uninterrupted payment on time of credit and financial obligations and legitimate monetary claims. There are LIQUIDITY of banks, firms, liquid assets, liquid funds. LIQUIDITY of the bank - the ability to ensure the timely repayment of obligations, i.e. the degree of compliance of the bank's assets and liabilities in terms of volumes and terms. To determine the degree of bank LIQUIDITY in many countries, systems of LIQUIDITY ratios are used as the ratio of certain items of their asset and liability, developed and approved regulations, prescribing to maintain the established level of these coefficients. An increase in LIQUIDITY implies a decrease in the profitability of a banking institution due to an increase in the share of liquid assets. Liquid assets are easily realizable funds - short-term government securities, current accounts, cash, etc., which almost do not generate income in the form of interest. However, in times of crisis, depression, credit institutions, in order to fulfill their obligations, are forced to accumulate liquid assets by selling highly profitable, but long-term securities. LIQUIDITY of a firm is the ratio of the amount of its debt and liquid funds, i.e. those funds that can be used to pay off the debt: cash, bank deposits, realizable elements of working capital, etc. There is a classification of cash and financial assets according to the degree of LIQUIDITY, i.e. by the speed and ease of their conversion into cash or other acceptable means of payment; the higher the degree of LIQUIDITY, the lower the yield on this asset, as a rule, and vice versa. A special type of LIQUIDITY is international LIQUIDITY, which is characterized by the ratio between foreign exchange reserves and the amount of external debt of the respective countries, provided by these reserves. In the context of a sharp increase in external debt, the problem of LIQUIDITY becomes much more acute.

Explanatory dictionary of the Russian language. D.N. Ushakov

liquidity

liquidity, pl. no, w. (Fin. trade. new.). Distraction noun to liquidity. liquidity of goods. liquidity of liabilities.

New explanatory and derivational dictionary of the Russian language, T. F. Efremova.

Encyclopedic Dictionary, 1998

liquidity

LIQUIDITY (from Latin liquidus - liquid, flowing) mobility of assets of enterprises, firms or banks, ensuring timely payment of their obligations.

Liquidity

(from lat. liquidus ≈ liquid, flowing), mobility, mobility of assets of enterprises, firms or banks in capitalist countries, providing the actual opportunity (ability) to uninterruptedly pay all their obligations and legal monetary claims placed on them on time. The degree of L. is determined by the ratio between cash and rapidly realizable assets of an enterprise, firm, or bank and the amount of their short-term liabilities. Fast-moving (liquid) assets include government securities, shares and bonds of large joint-stock companies that are in constant demand on the stock exchange, time bills of reputable firms that are freely accepted for accounting and rediscounting by banks, gold and other precious metals, as well as indisputable receivables. debt payable on demand or within a short period of time. In industrial and trade enterprises liquid assets also include easily realizable inventory items. The higher the share of assets that can quickly turn into cash, the higher the L. of an enterprise, firm, or bank. Of particular importance in a capitalist economy is the lending of commercial banks and their uninterrupted payment of depositors' claims. To ensure it, banking legislation usually establishes the amount of cash reserves that commercial banks are required to keep in the central bank - as a percentage of the amount of their current accounts and time deposits (the so-called minimum bank reserves).

Market fluctuations and in particular economic crises worsen the L. of individual enterprises, firms and banks, which leads them to bankruptcy. Under the conditions of the general crisis of capitalism, the circulation of less powerful banks worsens; they are absorbed by larger banks, which merge into giant banks (see Concentration of Banks).

A special type of currency is international currency, which is determined by the ratio between the gold and foreign exchange reserves of the governments and central banks of capitalist countries and the amount of their foreign payments, which must be secured by these reserves. After World War II (1939–45), this ratio worsened, and the problem of international L. became sharply aggravated. Significantly increased turnover foreign trade(both in physical volume and especially in value terms) due to widespread inflation and rising prices, with the relative stability of the amount of gold reserves due to the artificially low price of gold maintained by the USA (until December 1971 ≈ 35 dollars, until February 1973 ≈ 38 dollars ., since February 1973 - 42.2 dollars per 1 troy ounce) and with an uneven distribution of gold and foreign exchange reserves between countries (see also Foreign exchange reserves).

M. G. Polyakov.

Wikipedia

Liquidity

Liquidity- an economic term denoting the ability of assets to be quickly sold at a price close to the market. Liquid- convertible into money.

Usually distinguish highly liquid, low-liquid and illiquid values. The easier and faster an asset can be exchanged for its full value, the more liquid it is. For a product, liquidity will correspond to the speed of its sale at a nominal price, without additional discounts.

For example, the assets of an enterprise reflected in the balance sheet have different liquidity:

• cash in the accounts and cash desks of the enterprise
• bank bills, government securities
• current accounts receivable, loans issued, corporate securities (shares of enterprises listed on the stock exchange, bills of exchange)
• stocks of goods and raw materials in warehouses
• cars and equipment
• buildings and constructions
• Construction in progress

The term "liquidity" is also used in relation to banks (see Bank liquidity), businesses, the market, securities, etc. The meaning of the term in each of these contexts is described in the sections below.

Examples of the use of the word liquidity in the literature.

Instant liquidity financial markets allowed international capital to leave these countries very quickly, which unfolded a spiral of self-aggravation of the crisis despite the massive assistance of the world monetary authorities: the IMF has already approved the provision of emergency loans to ASEAN countries in the amount of more than 100 billion dollars.

At the same time, throughout the entire period preceding the crisis, until mid-1997, international investors sent very significant funds to these countries, supporting both large industrial projects and liquidity stock markets.

After the sobering default of Mexico in 1982, developed countries began to actively design debt restructuring projects that, on the one hand, would ensure the maintenance of liquidity market and, on the other hand, would not cause irreparable damage to large international banks.

The reporting and analysis department prepares bank statements, analyzes financial activities bank, his liquidity and profitability of operations.

There is a small problem here with liquidity Mr. Blunter,” Pendel said as they sat at the chessboard on the north veranda.

His mind brushed aside the useless data that flickered through his mind: fuel, space station fees, new equipment, medical and dental care, depleted weapons stocks, people's pay, turnover, liquidity, freedom of financial maneuver.

Analysis financial position Company, its solvency, liquidity assets, the ratio of own and borrowed funds.

The general aim of the policy of the concerns is, of course, to preserve liquidity and profitability of its subsidiaries.

The example shows the overall development of subsidiaries in terms of profitability and liquidity.

The property.

If we evaluate everything financial instruments— real estate is a low-liquid instrument. But if we consider only one of them, then again there is a division into low and highly liquid.

For example, luxury apartments, high-value country houses are low-liquid real estate. To sell it at a fair market price, you need to spend a lot of time (several months). And even then, in the end, you still have to throw off the price to the buyer.

And if you take economy-class housing, and even in a good location in the city (somewhere in the center, or in a normal area), then you can consider it as highly liquid real estate due to the fact that there is always a demand for it and it can be easily sold literally in a couple of weeks, in extreme cases 1-2 months.

Why is liquidity so important?

The concept of liquidity is important for investors whose goal is to make a profit from invested funds. And in case of any negative circumstances on financial market they should be able to quickly dispose of unnecessary assets by reasonable prices. And transfer the received money to another most promising (and more profitable) financial instrument.

Therefore, when investing money, an investor always tries to choose highly liquid instruments.

For example, if we consider the real estate market, then with a downward trend, you can most quickly get rid of inexpensive real estate. Those. if choosing between ordinary Khrushchev apartments and premium-class housing, the investor will choose the former, due to their high liquidity.

The same is true for the stock market. In the event of a possible collapse of the stock market (which happens periodically), the investor must quickly and with minimal losses get rid of the asset falling in price. And if he has only low-liquid shares in his portfolio, on which there is no buyer, then it remains only to watch how the value of the shares he bought decreases. And in the mind to count the losses.

Many do not even know what liquidity is. This word, which comes from the Latin “liquidus” (“fluid”, “liquid”), is most often understood as the mobility of assets, which ensures the ability of their owner to pay obligations without interruption and on time.

To date, there are several concepts related to each other: liquidity of assets, property, balance sheet, enterprise, market, money, stock market. The liquidity of the balance sheet is the basis of the liquidity of the enterprise, since it is more important for it to have cash than profit. Lack of money often leads to a deplorable financial condition.

It is noteworthy that the liquidity of the balance sheet is a more capacious concept than the liquidity of property. This term is applied to enterprises, banks, stock markets, various organizations, securities. The ratio of the amount of cash and assets sold in the shortest possible time and the amount of current liabilities (liabilities) determine the degree of liquidity. The concept of "liquid" refers to any asset that is quickly convertible into money. This category includes:

• stocks and bonds of large joint-stock companies;
• state securities;
• term bills of well-known companies;
• undisputed receivables;
• easily realizable values;
• precious metals.

The larger the share of such assets, the higher the liquidity.

Types of assets

Liquidity is the ability of values ​​(assets) to be sold as soon as possible at a near-market price. Every organization has the following types of assets:

• illiquid, convertible into cash at book value only after a long period of time and those that are never realized. They include various structures; equipment and machines that are prepared for installation; intangible assets; Construction in progress; long-term financial investments; overdue receivables; stocks of products that have not found a market;
• low-liquidity (slowly sold), sold at a cost close to the market for a significant period of time. These include some fixed assets, certain types stocks, long-term receivables;
• liquid, sold relatively quickly. They include short-term receivables; some stocks; company securities;
• highly liquid, which are sold very quickly. These include money in accounts, at the cash desk; short-term investments; bills; government securities.

Liquidity of enterprises

The liquidity of an enterprise is the ability to pay short-term (current) accounts payable through the sale of current assets. At financial analysis its solvency is assessed. Its main instrument is financial indicators called liquidity ratios. They are calculated according to the financial statements. These indicators characterize the nominal ability of the enterprise to repay the current debt with current assets. Often their calculation is accompanied by a balance modification, which is carried out to obtain an adequate assessment of liquidity. different types assets.

All values ​​are different different levels liquidity. It is because of this that some components of the balance sheet of the enterprise, when it is modified, are taken out of the limits of assets. When determining liquidity ratios, they are not taken into account. There are 4 groups of assets:

• the most liquid (A1);
• implemented quickly (A2);
• implemented slowly (A3);
• implemented with difficulty (A4).

Obligations (liabilities) are divided into 4 groups:

• the most urgent (P1);
• short-term (P2);
• long-term (P3);
• permanent (P4).

An enterprise can be called liquid only when the following conditions are met: A1> P1, A2> P2, A3> P3, A4<П4 (обладает регулярным характером). При выполнении 3 первых неравенств, последнее выполняется обязательно.

Enterprise liquidity indicators

When assessing the degree of solvency of an enterprise, the following coefficients are determined:

1. Ktl (current liquidity), characterizing its ability to repay current accounts payable with current assets. It is also referred to as the debt coverage ratio. It characterizes the solvency, taking into account the expected receipts of receivables. Simply put: if current assets > current liabilities (liabilities), then the company is operating successfully. The current liquidity ratio is calculated as follows:

Ktl \u003d (OA) / KO,

where OA is current assets, KO - short-term liabilities;

Ktl \u003d (A1 + A2 + A3) / (P1 + P2).

The higher the Ktl indicator, the higher the solvency. At different enterprises may be different Ktl. An indicator that is in the range of 1.5-2.5 is considered normal.

2. Kbl (quick liquidity), reflecting the company's ability to pay off short-term liabilities in the event of problems with the sale of products. The quick liquidity ratio is calculated only for certain types of assets. It is equal to the ratio of liquid current assets(TA) and obligations (TO):

Kbl \u003d (TA–Z) / TO,

where З - reserves;

Kbl \u003d (A1 + A2) / (P1 + P2).

Its optimal value is considered to be that which fits into the range of 0.7-1.0. The growth of Kbl associated with the increase in receivables is not a positive indicator of economic activity.

3. Kal (absolute liquidity), which establishes how much of the debt can be quickly repaid. Estimated data is taken from form No. 1, but only cash and assets equivalent to them are included in the assets of the enterprise. Cal is determined by the following formulas:

Kal \u003d (DS + KV) / (KP - DBP - RBR),

where DS - cash; KP - short-term liabilities; RBR - reserves for future expenses; KV - capital investments; DBP - future income;

Kal \u003d A1 / (P1 + P2).

The toughest of the solvency indicators is the absolute liquidity ratio. Its normal value cannot be less than 0.2, which means that the company will be able to pay up to 20% of current liabilities every day.

Market liquidity

This concept is understood as the reaction of the market to fluctuations in supply / demand by attracting buyers and sellers. In order to recognize it as liquid, there must be regular purchase and sale transactions on it in sufficient quantities. The difference in the price of demand (bids for purchase) and the price of offer (sale) should be small. In a highly liquid market, any one transaction does not have a significant impact on the cost of goods. In other words: market liquidity is its ability to absorb fluctuations in supply / demand without significant fluctuations in commodity prices.

The main property of money is its liquidity. It represents the possibility of their use as a means of payment in the acquisition of goods and other benefits. This indicator indicates their ability not to lose their nominal value. Money, more than other assets, is protected from fluctuations in its value. As a rule, money has absolute liquidity within a certain economic system, although they are not always exchanged for goods in a short time. Perfect monetary liquidity is possible in a stable monetary system.

Liquidity of securities

This term, used in relation to the stock market, means the ability to buy/sell any exchange instrument (currency pair, shares, futures) in the shortest possible time without losing their price. It means their comparative quantity, which is exchanged for money in a short period of time without a serious change in their market value. Low liquidity is proof that securities will not be sold/purchased within a certain period of time without significant financial losses.

High liquidity shows that securities can be quickly sold / bought without a serious impact of such an operation on the existing market price level. This type of liquidity is estimated by the number of transactions (trading volume). The spread is also taken into account (the difference between highest prices demand and minimum prices suggestions). At the same time, the greater the number of transactions and the smaller the spread, the higher the liquidity of securities.

As you know, not every product can be quickly sold without losing its price. Some goods are sold quickly - they have a steady supply and demand, they are said to be hot goods. And some will have to be sold for a long time, and you can’t do without discounts. The ability of a product to be quickly sold at a price close to the market is denoted by the economic term - liquidity. AT Everyday life this term is used infrequently, but you may well hear it on radio and TV, or see it in the news or articles published in the paper press or on Internet sites. What does this term mean, where it is used, and in what cases it can be very important - we will figure it out in this article if possible in simple words.

What is liquidity in simple terms?

In economic theory, there is not one but several definitions of liquidity. We will consider what it is in simple words, using only the most basic examples. Most often, liquidity is understood as the ability to sell an asset at a market price without difficulty and in the shortest possible time.

An asset can be any tangible or intangible value. In the financial and business sphere, these are securities, cash deposits, real estate, enterprises, products, etc.

Liquidity (translated from the Latin liquidus - liquid, flowing) is an economic term that refers to the ability of assets (values) to be quickly sold at a price close to the market. In other words, it is the ability of a commodity to be quickly converted into money.

Money, as a universal means of payment, has the greatest liquidity.

Another meaning of the term liquidity is the ability commercial organization, the state or any person to be liable for its financial obligations. This ability is influenced by many factors, including the economic situation in the country and the world, market conditions, the total value of the company's assets, etc.

For example, a bank will be liquid when, in the case of active lending to individuals and legal entities, he will have enough reserves to fulfill his obligations to return funds on deposits. And the liquidity of the state is determined by its ability to pay off debts to other countries in a timely manner, international organizations or banks.

Liquidity types

There are 3 types of liquidity:

• high;
• average;
• low.

High liquidity refers to those assets that can most easily be sold on the market. These include bank deposits and securities. With regard to enterprises and states, highly liquid are those that easily fulfill their financial obligations and make all payments in a timely manner.

Low liquid assets are real estate, businesses and commercial products. While shares can be sold in minutes, a house can take weeks or months to sell. In this case, the situation may be such that the property will have to be sold at a significant discount (discount). Illiquid organizations are those that are unable to repay the accumulated debts, the total value of their assets is lower than the existing debt.

The intermediate group includes, for example, metals, including precious ones. Their sale is usually not difficult, but it is far from always possible to get a fair price for them.

But this classification is characterized by simplification and generalization. In fact, within each group of assets there are highly liquid instruments and illiquid assets. For example, among the shares there are so-called “blue chips”: Sberbank, Aeroflot, Gazprom, Lukoil, etc. These are the shares of the most successful companies for which the demand is very high.

On the other hand, there are many so-called "junk" papers on the market. These are stocks or bonds that are of no value to investors, and therefore it becomes a difficult task to sell them. The discount on them can reach 30-50%, and the implementation period can be calculated in weeks.

The situation is similar in the real estate market. Finding a buyer for luxury housing is very difficult, it can take many months or you will have to significantly reduce the price (this is low-liquid housing). At the same time, a modest one-room apartment can be sold in a matter of weeks. Therefore, such an asset in this group can be considered quite highly liquid.

Why is liquidity analysis important?

The liquidity indicator is considered very important in the economy. Its analysis allows you to assess the current state of the company, the value of its assets and the ability to fulfill its financial obligations. Liquidity is used by investors to assess the prospects for investing in a particular asset.

The most valuable are, of course, highly liquid assets. They allow the investor to quickly respond to changes in the market and quickly transfer one financial instrument to another. That is why the real estate market always keeps a good demand for affordable housing. And in the foreign exchange market, investors prefer to invest in the US dollar or euro, but avoid more exotic monetary units.

Also, a competent investor carefully analyzes the stock market, giving preference to those securities that can later be easily sold. Mistakes and risky actions can cost a lot of money. By choosing low-liquid shares, an investor may find himself in a situation where no one will need them, even at a big discount. And in the event of a sharp drop in the quotes of these shares, he will have to record large losses.

As for enterprises, liquidity management has become an important task in any company. The tasks of financial analysts include:

• taking into account the financial resources of the company when determining the order of payment of invoices;
• prevention of cash gaps;
• determination of the minimum balance on the accounts, which will allow successful transactions the next day.

Properly organized work in the company ensures a clear interaction of various structural divisions, which allows you to use financial resources efficiently and avoid problems with making payments. In such a company, management has a complete picture of the financial situation, controls everything financial flows and can predict the state of the enterprise in the short and medium term. And in the analysis of the situation, liquidity plays an important role.

Liquidity is the ability to get rid of a certain product as quickly as possible by exchanging it for a cash equivalent. If a product is in demand on the market and sells well, this indicates its high liquidity. Depending on the speed of the sale of goods, its liquidity will be determined as high, medium or low.

It seems that all the main definitions and concepts are given in simple language - this is how Wikipedia describes the concept of "liquidity". Next, we will separately consider the liquidity of shares, enterprises and real estate, as well as the factors that influence and form liquidity. We will separately consider liquidity ratios and methods for assessing the solvency of a business.

High liquidity and low liquidity: what is the difference

All goods can be considered as highly liquid or low liquid depending on the speed of their sale. Therefore, from the point of view of the fastest possible receipt of money, securities and deposits in banks are highly liquid goods, because sometimes a couple of minutes are enough to turn them into banknotes. Real estate, on the other hand, will be “illiquid” in comparison with them, and the more expensive it is and the more difficult it is to sell, the less liquid commodity it will be considered.

Liquid currencies are the most popular banknotes used all over the world or in a certain large region for making purchase and sale transactions. The liquidity of a currency is affected by the economies of countries in which this currency is the main or reserve currency. The most liquid currencies in the world:

1. American dollar.
2. Euro.
3. British pound.
4. Japanese yen.
5. Swiss frank.
6. Australian dollar.
7. Canadian dollar.

The ruble is currently an illiquid currency.

Liquidity of securities: what makes blue chips special

Securities are called bills, shares, bonds and other monetary documents that certify some of the property rights of their owner (for example, the right to pay dividends - part of the company's profits). Being a highly liquid commodity, securities in their group are also divided into "liquid" and "non-liquid". Illiquid goods are rarely in short supply - there is little demand for them, few people buy them.

Securities, in their own hierarchy, are subdivided into blue chips, second tier, third tier, and so on. In simple terms, the more distant the securities are, the lower their liquidity. Such securities are difficult to sell at a good price - as a rule, on their sale you can lose about a quarter of their original value.

"Blue chips" is a concept that came from American casinos. There, blue chips have the highest monetary value. Today, this is the name given to the most liquid shares - shares of large companies that are in the top thirty largest companies in their country or in the world (depending on which market we evaluate).

In our country, "blue chips" mainly include shares of banks and companies for the extraction and processing of gas and oil: Rosneft, Gazprom, LUKOIL, Sberbank. In America, "blue chips" are concentrated in the field of IT - they include the securities of Google, Microsoft, Facebook and a number of other corporations.

Business liquidity: what does it depend on

The liquidity of an enterprise is a very important indicator of its solvency and general condition. In the economic analysis of the company's success, balance sheet liquidity plays an important role - the company's ability to timely allocate cash flows to pay off debts. Simply put, the more a kind of "golden parachute" of free funds of the company, which it can reallocate to eliminate problems, the higher the liquidity of the balance sheet of such a company. Investors will invest in such a company.

The property of the enterprise is divided into assets and liabilities.

Assets can be:

• highly liquid (investments and finance).
• fast-selling (short-term debt).
• negotiable (sold slowly).
• non-negotiable (implemented very slowly).

Liabilities can be:

• urgent.
• current.
• long-term.
• the company's own capital.

About business liquidity analysis in general terms

To analyze the liquidity of an enterprise, the so-called liquidity ratios are used:

1. current liquidity ratio.
2. quick liquidity ratio.
3. absolute liquidity ratio.

The current liquidity ratio (aka the coverage ratio) determines the ratio of the company's financial assets and its short-term liabilities. It is believed that ideally this coefficient should be equal to 2.

The quick liquidity ratio is calculated as the sum of all highly liquid assets divided by the company's short-term debt. Quick liquidity is an indicator of solvency. Ideally, it should be equal to 1.

The absolute liquidity ratio varies from 0.05 to 0.1 and shows the reliability of the borrower.

Real estate liquidity: how is it determined

Real estate itself has low liquidity. However, if we consider, for example, an elite luxury house and a new budget segment building on the outskirts of a large city, the new building will have much greater liquidity, since much more people can buy apartments in it, and it will be easier to sell them.

In the sale of real estate, the same rules apply to determine liquidity - the easier it is to sell, the higher the liquidity.

Why is liquidity so important?

Potential investors are most interested in liquidity. On the one hand, they must be sure that the project can turn out to be profitable and their securities will rise in price. On the other hand, the loss control rules force investors to choose projects whose securities will be easier to get rid of in case of unforeseen difficulties.

Crashes happen periodically in the stock market, and traders whose portfolios contain only low-liquid stocks, in such cases, are forced to look at falling quotes and calculate their losses, being unable to get rid of illiquid securities.