Istituto Comprensivo Roseto 1

The speed with which an asset can beexchanged for cash at book value is referred to as liquidityand it is an important characteristic of cash equivalent assets. Companies may intentionally carry higher balances of cash equivalents so they can capitalize on business opportunities when they arise. Instead of locking capital into a long-term, illiquid, and    »

Some lenders may require that, in return for a loan, a company maintain a designated amount of liquid cash equivalents. This financial restriction is intended to protect the lender’s financial interest should business slow. It can also result in better loan terms (due to less risk) for the company that agrees to it. Moreover, a    »