They are absolutely liquid means of payment. Liquidity - what is it in simple terms. What is project liquidity

Hello dear readers! Ruslan Miftakhov is glad to welcome you again! Many of us have heard about liquidity and have a general idea of \u200b\u200bwhat it is. But what exactly this concept means, few know.

Liquidity is in simple words the degree of stability of the enterprise.

Today we will consider its essence, significance, coefficients and varieties.

Liquidity is the ability to effectively and quickly exchange property for cash, and get it in your hands.

Assets and financial instruments include everything that has market value - deposits in the bank, securities, real estate, commercial products, and the enterprises themselves.

Liquidity, based on the rate of "exchange" for money, is divided into 3 main types: high, medium and low.

For example, securities (they can be sold in a couple of seconds on a specialized market), bank deposits have high liquidity, and real estate, business, goods in the production process - low.

However, this indicator may be different for one financial instrument. An example of such an instrument is stocks.

If the securities are classified as (shares of Gazprom, VTB, and large corporations), then the demand for them is constantly increasing, they can be sold at a profitable price - this is highly liquid assets.

Second-tier stocks sell for a little longer and are in less demand - these are stocks with an average turnover.

TO low liquid include the so-called "junk" shares, which can be sold only after the price has decreased by 20-30%, therefore, their acquisition is associated with great risk.

The general condition of the enterprise, its solvency are closely related to the liquidity of the balance sheet.

Balance sheet liquidity is the company's ability to timely pay off debts on accounts held by property. It shows how well the property of the enterprise is managed.

The property of the company consists of assets and liabilities.

Depending on the possibility of implementation, assets are divided into:

highly liquid (finance and short-term investments);
fast selling (short-term debt);
negotiable (slowly sold);
non-negotiable (poorly realizable, long-term obligations).

The company's liabilities are grouped according to maturity into urgent (liabilities with an expired maturity), current (accounts payable for goods), long-term liabilities and equity.

Main odds

Now let's look at how an organization's liquidity and solvency is analyzed. For this, such liquidity ratios are used as:

Current (coverage ratio) determines the overall assessment of the company's liquidity, and is determined by the ratio of all current (current) assets with the organization's short-term liabilities.
Fast (intermediate) - characterizes the payment potential of the company. To determine the urgent liquidity, highly liquid assets are summed up with well-realizable assets and divided into short-term debts. The bank pays attention to its value when lending to an organization.
Absolute - the ratio of quick assets to short-term liabilities is determined. The resulting indicator characterizes the reliability of the borrower, as well as cooperation with the organization, its ability to quickly pay off debts.

The permissible value of indicators depends on various factors (field of activity of the company, lending rules, amount of cash turnover, reputation and image of the organization).

However, according to practice, there are indicative normative values coefficients: current liquidity - equal to 2, fast - 1, absolute - from 0.05 to 0.1.

Why is good performance so important?

IN modern world many companies require loans as well as investor funds.

Before issuing a loan, banking institutions assess the state of the company, its solvency (mainly they are interested in a large percentage of ownership own funds compared with borrowed).

If these indicators are satisfactory, meet the standards, the company receives a loan that can be spent on development and activities. And it is very important for an organization to have additional funds.

As for investors, they are interested in making a profit from their investments, and in case of unforeseen circumstances, they prefer to be able to quickly sell their existing assets. Therefore, they choose financial instruments that are highly liquid.

If we talk about real estate, then investors will be more interested in properties with a low cost, since expensive housing is harder to sell.

To consolidate the concept of liquidity, let's watch the video, by the way, this video contains a hint to the fifth crossword puzzle, look carefully.

So we come to the end of the article, quite interesting and easy to understand, isn't it? If you liked it, then do not forget to rate it, it is very important for us!

I would like to wish you success! And see you soon!

Ruslan Miftakhov was with you.

Liquidity is the ability to get away with a certain product as quickly as possible by exchanging it for a cash equivalent. If any product is in demand on the market and is being sold well, this indicates its high liquidity. Depending on the speed at which a product is sold, its liquidity will be defined as high, medium or low.

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

Highly liquid and low liquid: 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 earliest possible receipt of money, securities and deposits in banks are highly liquid goods, because sometimes even a couple of minutes is enough to convert them into banknotes. Real estate will be “illiquid” in comparison with them, and the more expensive it is and the more difficult it is to sell it, the less liquid it will be considered a commodity.

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 listed as the main or reserve one. The most liquid currencies in the world:

U.S.
Euro.
British pound.
Japanese yen.
Swiss frank.
Australian dollar.
Canadian dollar.

The ruble is currently an illiquid currency.

Liquidity of securities: what makes blue chips special

Securities are called promissory notes, shares, bonds and other monetary documents certifying 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 “illiquid”. Illiquid goods they are rarely in short supply - there is little demand for them, they are bought a little.

Securities in their own hierarchy are categorized into blue chips, second tier, third tier, and so on. In simple terms, the more distant echelon securities belong, 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" - a concept that came from American casinos. There, blue chips have the highest denomination. Today the most liquid stocks are called so - stocks large companies, which are in the top thirty largest firms in their country or in the world (depending on which market we are evaluating).

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

Business liquidity: what does it depend on

The liquidity of a company is a very important indicator of its solvency and general condition. IN economic analysis the success of the company, the liquidity of the balance plays an important role - the ability of the company to timely distribute cash flows to pay off debts. Simply put, the more a kind of "golden parachute" of free funds of a company, which it can redistribute 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 an enterprise is subdivided into assets and liabilities.

Assets can be:

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

Passives can be:

urgent.
current.
long-term.
own capital of the company.

On the analysis of business liquidity in general terms

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

current liquidity ratio.
quick ratio.
coefficient absolute liquidity.

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

The quick ratio is considered as the sum of all highly liquid assets, divided by the firm's short-term debt. Fast liquidity is an indicator of solvency. Ideally, its indicator 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 building of the budget segment on the outskirts of a large city, the new building will have much more liquidity, since many 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 value. On the other hand, the rules of loss control forces investors to choose projects, from which it will be easier to get rid of securities in case of unforeseen difficulties.

The stock market periodically crashes, and traders, in whose portfolios there are only low-liquid shares, in such cases are forced to look at falling quotes and calculate their losses, being unable to get rid of illiquid securities.

Definition

Liquidity - the ability of assets to be quickly sold at a price close to the market. Liquidity - the ability to turn into money (see the term "liquid assets").

Usually distinguish between highly liquid, low-liquid and illiquid values \u200b\u200b(assets). The easier and faster you can get the full value of an asset, the more liquid it is. For a commodity, liquidity will correspond to the speed of its sale at a nominal price.

In the Russian balance sheet, the assets of the enterprise are arranged in descending order of liquidity. They can be divided into the following groups:

A1. Highly liquid assets (cash and short-term financial investments)

A2. Quick-selling assets (short-term receivables, i.e. receivables expected to be paid within 12 months after the reporting date)

A3. Slowly realizable assets (other, not mentioned above, current assets)

A4. Hard-to-sell assets (all non-current assets)

Balance sheet liabilities by the degree of increase in the maturity of obligations are grouped as follows:

P1. The most urgent liabilities (borrowed funds, which include current accounts payable to suppliers and contractors, personnel, budget, etc.)

P2. Medium-term liabilities (short-term loans and borrowings, reserves for future expenses, other short-term liabilities)

P3. Long-term liabilities (section IV of the balance sheet "Long-term liabilities")

P4. Permanent liabilities (equity capital of the organization).

To determine the liquidity of the balance sheet, you should compare the results for each group of assets and liabilities. He considers liquidity ideal if the following conditions are met:

A1\u003e P1
A2\u003e P2
A3\u003e P3
A4< П4

For example, the above analysis of liquidity by groups can be performed automatically in the program "Your financial analyst".

Calculation of liquidity ratios

In practice financial analysis there are three main indicators of liquidity.

Current liquidity

Current (total) liquidity ratio (coverage ratio; English current ratio, CR) is a financial ratio equal to the ratio of current (current) assets to short-term liabilities (current liabilities). This is the most common and commonly used measure of liquidity. Formula:

Ktl \u003d OA / KO

where: Ктл - current liquidity ratio;
ОА - current assets (attention: until 2011, long-term accounts receivable were indicated in the Balance Sheet as part of current assets - it must be excluded from current assets!);
KO - short-term liabilities.

The ratio reflects the company's ability to pay off current (short-term) liabilities at the expense of current assets only. The higher the indicator, the better the company's solvency.

A coefficient of 2 or more is considered normal (this value is most often used in Russian regulations; in world practice, it is considered normal from 1.5 to 2.5, depending on the industry). A value below 1 indicates a high financial riskdue to the fact that the company is not able to consistently pay current bills. A value of more than 3 may indicate an irrational capital structure.

Fast liquidity

Quick ratio (sometimes called intermediate or quick ratio; English quick ratio, QR) is a financial ratio equal to the ratio of highly liquid current assets to short-term liabilities (current liabilities). The source of data is the company's balance sheet in the same way as for current liquidity, but inventories are not taken into account in the composition of assets, since when they are forced to sell, the losses will be maximum among all working capital. Quick liquidity formula:

Kbl \u003d (Short-term receivables + Short-term financial investments + Cash) / Current liabilities

The ratio reflects the company's ability to repay its current liabilities in the event of difficulties with the sale of products.

A coefficient value of at least 1 is considered normal.

Absolute liquidity

Absolute liquidity ratio - financial ratio equal to the ratio money and short-term financial investments to short-term liabilities (current liabilities). The data source is the company's balance sheet in the same way as for current liquidity, but only cash and funds close to them are taken into account as assets:

Cal \u003d (Cash + short-term financial investments) / Current liabilities

Unlike the two above, this coefficient is not widely used in the west. According to Russian regulations a coefficient value of at least 0.2 is considered normal.

The ratio of current, quick and absolute liquidity can be automatically calculated according to the balance sheet data in the program "

Hello! In this article we will talk about liquidity.

Today you will learn:

What is liquidity.
What are the types of liquidity.
What liquidity affects in business.
How to analyze liquidity.

What is liquidity in simple words

Liquidity is an important economic term, ignorance of which can be detrimental to business or private individuals.

Liquidity Is the ability of an asset to quickly turn into money without losing value.

In simple words, liquidity determines how long it takes to sell a product at a market price. The shorter this period, the more liquid the goods are.

For example, currency is a highly liquid asset, because it can be exchanged at any time without losing value. Real estate, on the other hand, is a low-liquid asset, because finding a buyer for an apartment is much more difficult.

Liquidity types

Let's take a closer look at the most popular types of liquidity:

Current liquidity means whether the company can pay off short-term (up to 1 month) liabilities at the expense of highly liquid assets (cash and receivables).
Fast liquidity - the ability of a company to pay off liabilities at the expense of highly liquid assets, goods and materials.
Instant liquidity means whether a company can pay off its daily debt with available funds.

Current liquidity is also called short-term liquidity, and instant liquidity is called absolute.

Additional types can be distinguished by the scope of the indicator:

The liquidity of a product is the ability of a particular product to be sold at a market price in a short time.
Balance sheet liquidity is the ability of the company's assets to quickly repay the company's liabilities.
Bank liquidity is the ability of a credit institution to pay off its obligations.
A company's liquidity is the ability to quickly pay off debts.
Market liquidity is the ability to reduce losses in the event of price fluctuations for various groups of goods.
Currency liquidity is the ability of the state to quickly pay debts at the international level.
The liquidity of a security is the ability of a security to be traded at a market price.

Now let's consider the specific application of the concept of liquidity in each of the three popular areas: liquidity of a product (including money and securities), an enterprise and a balance sheet.

Product liquidity

The liquidity of a product is the ability to be quickly sold at an average market price. If the product is highly liquid, then it will take a relatively short period to sell it - up to 1 day. If the product has medium liquidity, then the sale time will range from 1 day to several weeks. If the product is low-liquid, then the timing of its sale can be significantly delayed.

Even currency has its own liquidity. Despite the fact that money is the most highly liquid asset, this does not happen with all currencies. For example, if you have a rare currency of the Congo country, then in some provincial city it is a low-liquid asset. But if you have dollars, then in any locality you can exchange them for the same value.

The less a currency is in demand on the world stage, the less liquid it is.

The liquidity of securities is very important indicator... Despite the fact that the turnover of exchanges has long gone beyond billions of dollars, there are some securities, the liquidity of which remains quite low. Usually these are stocks and bonds of companies of the 2nd - 3rd echelons (medium and small players or those with outstanding obligations).

For example, in 2010 - 2012, there were many stories that people who bought shares of small companies could wait weeks to sell them at the average market price. That is, the exchange itself gave a quote for these shares, but no one wanted to buy at the specified price. But not selling an asset for real value is a huge liquidity risk.

Now the situation with the liquidity of securities in the country is slowly improving. More and more people are interested in investing in stocks, bonds and investment funds.

The more people are interested in an asset, the higher its liquidity. Low liquidity means that the product is less in demand at a given time.

Company liquidity

One of the main tasks of the efficiency of the enterprise is to assess its solvency. This indicator directly depends on the liquidity of the company's assets.

To assess the liquidity of an enterprise, liquidity ratios are used and there are 4 groups of asset liquidity:

A1 - the most liquid assets (cash and financial investments);
A2 - quickly realizable assets (materials + goods and short-term receivables);
A3 - slow-moving assets (VAT and long-term receivables);
A4 - hard-to-sell assets (intangible assets).

And also there are 4 groups of liabilities:

P1 - the most urgent obligations;
P2 - short-term liabilities;
P3 - long-term liabilities;
P4 - permanent liabilities.

An enterprise is liquid if A1\u003e / \u003d P1, A2\u003e / \u003d P2, A3\u003e / \u003d P3, A4 A liquidity deficit can lead to the fact that the company's free funds will not be enough to pay off debts.

Bank liquidity

Credit institutions are fully operational mechanisms, the work of which is monitored by the Central Bank. If the standards are not observed, the Central Bank can either fine the credit institution or revoke the license (in case of repeated violation).

As for the liquidity indicator for the bank's assets, its essence is as follows. The bank cannot issue loans to everyone in a row, relying solely on its assets and funds of depositors. For financial institutions it is necessary to have free funds in order to pay off urgent obligations, and have capital to return deposits demanded earlier.

There are three bank liquidity ratios: N2, N3 and N4. H2 - limitation of default on obligations within one calendar day... That is, the bank's cash desk must have the funds that are needed to pay off all obligations + an additional 15% of this volume.

If the bank has demand deposits in the amount of 10,000,000 rubles, then within one day the cash desk must have about 11,500,000 rubles.

Н3 - monthly liquidity rate. Its minimum value is 50%. H3 includes all demand deposits and those that will be returned within the next 30 days.

Н4 is an indicator that determines the liquidity standards for long-term assets. Violation of this standard indicates that the bank uses borrowed funds to issue loans for a long time. For example, a bank issues a loan for 5 years, but received these funds for 1 year in a foreign credit institution.

Unlike a company, which itself can decide how much liquidity it should have, banks are subject to clear requirements from the Regulator.

Balance sheet liquidity - 3 formulas

Current liquidity ratio shows whether it is possible to pay off short-term liabilities at the expense of short-term assets.

It is considered as follows: (Line 1200) / (Line 1500-1530-1540)

The normal current liquidity ratio should range from 1.5 to 2.5. A value of less than 1 indicates that the company is unable to pay short-term debts, and a revision of the asset structure is required.

Quick liquidity ratio means whether the company will be able to pay off its obligations if there is a difficulty in selling products.

It is considered as follows: (1230 + 1240 + 1250) / (1500-1530-1540)

The normal value of the quick ratio is an indicator in the range from 0.7 to 1. But most of the assets should not be accounts receivable, which is difficult to collect from borrowers.

Absolute liquidity ratio - an indicator that determines whether it is possible to pay off short-term liabilities at the expense of cash and short-term receivables.

It is calculated as follows: (1250 + 1240) / (1500-1530-1540)

A value of 0.2 or more is normal. This means that every day a company will be able to pay about 20% of its short-term debts with free cash.

These indicators help to reallocate free cash to different assets. Loss of liquidity for an enterprise can lead to an increase in debt obligations and a lack of funds to repay them. Therefore, it is recommended to keep the indicators within the normal range.

Liquidity analysis

Liquidity analysis can be divided into two categories: liquidity of investments and liquidity of enterprise assets. Let's start with our own investments.

Investments are made based on long-term prospects. For this, medium-liquid and low-liquid assets, such as real estate, non-government bonds and shares of the 2nd or 3rd echelons, may be suitable.

For conservative investors, the ratio of assets with high to low liquidity can be roughly 50/50.

With constant trading on the exchange, the situation is exactly the opposite. In order to instantly fix a profit, an asset must be sold quickly and profitably without loss of value. That is why people who trade and gamble in the stock market understand that low-liquid stocks and bonds will simply be difficult to sell at the right moment.

For traders and aggressive investors, it is better to have about 80% of assets with high liquidity. Long-term liquidity plays here important role... And the level of liquidity of each security can be determined by the difference between the purchase price and the sale price.

The liquidity of the company's assets is formed on the basis of internal assets. Most of the organization's property is extremely poorly converted into money. It is difficult to sell a building, equipment and materials without significantly losing their value. That is why you need to carefully monitor liquidity - the amount of goods in circulation and the amount of money in your accounts.

Each company chooses its own indicator as the liquidity standard. If using borrowed money minimal, and you don't need a lot of money to buy materials, you can reduce this indicator. But if a company actively uses credit money, much more liquid assets are needed. You can focus on the formulas given in the paragraph "Enterprise liquidity", choosing the ratio of assets that is acceptable for a particular type of business.

Conclusion

Liquidity is an important indicator for both those who do business and for investors. For the first it is an indicator of the normal ratio of free money and liabilities of the enterprise, for the second it is a way to optimize their investments.

The concept of liquidity is often found in professional literature, but novice investors rarely pay attention to it. And in vain. Indeed, the amount of risk and profitability depends on the liquidity of assets. And the quality of the investment portfolio determines the tactics and strategy of investment, not to mention financial stability. Let's take a closer look at this important economic category.

Economic essence

What is liquidity in simple terms? Liquidity is the ability to quickly turn into money without large financial losses. The term liquidity comes from the Latin liquidus - liquid, flowing, that is, easily converted into money.

The above definition sets the main parameters:

transformation time;
the amount of financial costs associated with the transformation.

How is liquidity measured?

The number of days required to sell the asset at the mid-market price:

so, you can sell or redeem a highly profitable security within a few minutes;
and the financial liquidity of investments in the construction of a cottage community is measured in years.

The most indicative in this sense is the structure of assets of any production or commercial enterprise... Liquidity:

Absolute. Assets do not require transformation and represent ready funds payment (cash and cash equivalents).
Urgent (up to 7 days). Short-term investments (for example, in government bonds and bills).
High (up to 30 days). Goods shipped, short-term receivables.
Medium (up to 90 days). Work in progress, stocks in warehouses (raw materials, materials and finished products).
Low (up to 360 days). Long-term investments, accounts receivable.
Illiquid assets. Fixed assets (machinery, equipment, buildings, structures) and intangible assets.

Keep in mind that the above classification is rather arbitrary, since in each group specific assets can be distinguished with varying degrees of turnover depending on the specifics of the activity. So, the "life" of accounts receivable can be different. “Long” debt becomes low liquid or even illiquid.

With an urgent transformation of any instruments into monetary form, financial losses are inevitable, which include:

a discount to the market price of an asset provided by the buyer for the purpose of prompt sale;
additional sales costs (taxes, fees, duties, commissions, etc.).

The following classification of financial losses has been adopted: low (up to 5%); medium (up to 10%); high (up to 20%); very high (over 20%).

Obviously, financial losses and the speed of transformation are inversely related.

Why is it so important?

Liquidity is the second most important (after profitability) characteristic of any asset, including investment.

For an investor, especially one acting in the financial market, the assessment of the quality of the investment portfolio becomes more important than for a large industrial or commercial enterprise. Causes:

An individual investor is one by definition. Its ability to attract alternative sources of capital (and thus reduce risks) is limited.
The average investor, as a rule, does not have a big "safety cushion" behind his back in the form of fixed assets: buildings, structures, machinery and equipment.
In pursuit of profitability, he tends to invest in more risky assets.

Thus, for a portfolio investor, high liquidity means:

flexibility of the investment strategy and tactics (the possibility of the earliest possible withdrawal of funds from ineffective projects and their reinvestment);
turnover rate, and, therefore, profitability (the faster you earn on an investment instrument, the higher the effective rate of return);
personal financial stability.

Rule 1. Invest in assets with a high degree of liquidity on a level playing field. This will give you the freedom to maneuver in the portfolio management process.

Rule 2. Profitability and liquidity are interconnected. Investments in low-liquid assets should generate more investment income.

How to assess the liquidity of an asset

An asset's liquidity represents the market opportunities in which it can be sold or bought.

Market liquidity is determined by:

The number of transactions.
The spread (difference) between the maximum declared bid price (bid) and the minimum declared bid price (offer).

Rule 3. The larger the volume of transactions and the narrower the spread, the more liquid the market is.

Thus, individual transactions will not have a significant impact on the market as a whole. This means that, having an asset with mid-market parameters, you can sell it at any time.

By analogy with the general rules:

instant liquidity of a security in the stock market is determined by the amount quotation bids (the author indicates the price and volume, giving the opportunity to other players to buy or sell a financial instrument at any time);
the trading liquidity of a security is determined by the number of market orders (the author indicates only the volume, the transaction is automatically concluded at the best quoted price).

You will always find such information on exchange portals, financial and brokerage sites.

Increased price volatility and decreased trading volume indicate investor anxiety and are the first symptoms of increased investment risks. If the situation does not last for the first week, the liquidity of securities, and with it the yield, will inevitably begin to fall.

Obviously, it will be possible to assess the liquidity of assets in this way only on the exchange market, where securities are circulated in an open financial market and free competition.

The rules of circulation on the OTC market are established by the counterparties themselves, and the process of concluding a transaction is complicated several times (searching for clients, attracting intermediaries and guarantors, confirmation operations legal status transactions, etc.). As a result, the degree of liquidity of assets in the OTC market is an order of magnitude lower. Moreover, it is difficult to accurately predict and calculate it.

Study the segment of the one-room apartment market: the number of transactions for the period, the average price per square meter, the average price of the object, the range of prices. You can easily find such information in real estate market reviews, analytical studies, on agency websites. From the analysis, you will learn that the market for economy-class apartments in Moscow is considered a well-liquid segment of the real estate market.
Determine the required level of return on the sale.
Predict the time it will take to find a buyer.
Calculate the time required for the entire complex of legal and administrative procedures related to the sale (about 1 month).
Estimate the associated financial and tax costs.

So only operating cycle sales (finding a buyer, completing a transaction and receiving funds) will take you 2-3 months. And if you count on super profits, then the process can take up to six months. That is, a “good” asset by the standards of the real estate market turns into a low-liquid asset before our very eyes.

What is project liquidity

For the purposes of this article, we will define it as the period of time that elapsed from the moment of the first investment until the moment of the potential sale of an asset at a price that compensates for the investment taking into account the time factor (discounting). If you invest in a venture project today, then this investment asset will not become liquid until you can exit it with a profit. The event is probabilistic, which means that in the early stages such investments are absolutely illiquid.

How to assess the liquidity of an investment portfolio

How to value a particular asset is relatively clear. But what if we are talking about a comprehensive assessment of the quality of the portfolio of an individual depositor or investment company? In commercial enterprises, special coefficients are used for this:

Absolute liquidity \u003d (Cash and their equivalents + Short-term investments) / Current liabilities. Norm: 0.2.
Quick (urgent) liquidity \u003d (Current assets - Inventories) / Current liabilities. Standard: 1.
Current liquidity \u003d Current assets / Current liabilities. Standard: 2.

What is the liquidity of an enterprise? The higher the value of the ratios, the faster the company will be able to turn part of its assets into money in order to avoid problems. Moreover, the value of the last coefficient already borders on the assessment of the state of financial stability.

What should an ordinary investor do? Follow a similar path.

Estimate the level of liquidity of each specific asset included in your investment portfolio.
Group assets.
Calculate the share of each group in the total portfolio.

Instead of a conclusion

Investment asset

It might be helpful to read: