Which term describes assets readily convertible to cash in the ordinary course of business?

• A. Long-term investments
• B. Fixed assets
• C. Liquid assets
• D. Intangible assets

Answer: (C)

Assets are categorized by how quickly they can be converted into cash. The term for assets that can be turned into cash readily in the ordinary course of business is liquid assets. This group includes cash on hand and items that can be quickly sold for cash with minimal loss of value, such as marketable securities or short-term receivables. Having a strong supply of liquid assets helps a business cover day-to-day expenses and meet short-term obligations.

Long-term investments aren’t meant to be sold quickly; they’re held for future growth or strategic reasons, so they aren’t considered readily convertible in the ordinary course. Fixed assets—like property, plant, and equipment—are used in operations and would take time to sell without disrupting business. Intangible assets, such as patents or goodwill, have value but aren’t as easily turned into cash quickly, especially in a straightforward sale.