what are net liquid assets 
net liquid assets are a measure of an immediate or near term liquidity position of a firm calculated as liquid assets less current liabilities liquid assets are cash marketable securities and accounts receivables that can be readily converted to cash at their approximate current value understanding net liquid assetsthe amount of net liquid assets is one of a few measures that gives a snapshot of the financial condition of a firm cash and marketable securities are ready to deploy while accounts receivables could be turned into cash within a short period of time though perhaps not completely as there is typically a small percentage of bad debt associated with aged receivables inventory does not qualify as a liquid asset because it cannot be readily sold without a significant discount current liabilities mainly encompass accounts payable accrued liabilities income tax payable and a current portion of long term debt for the average company subtracting current liabilities from the above liquid assets shows the financial flexibility of a company to make a quick payment advantages of net liquid assetshaving a strong net liquid asset position is important for a firm because it demonstrates that a firm is able to pay off its short term obligations such as paying suppliers and paying off short term debt it also signifies that a company is able to make new investments such as the purchase of equipment without having to take on financing companies that have a strong net liquid asset position are also better placed in times of economic downturns they are in a position to weather the storm by relying on its liquid assets to continue paying its short term obligations even if business is not booming on the other hand a company that does not have a strong net liquid asset position and no significant revenues in an economic downturn will not be able to meet its obligations and may have to declare bankruptcy having net liquid assets also makes it easier to receive financing from a bank as it demonstrates the ability of a company to pay off its loans even in times of distress this also results in usually receiving a better interest rate on a loan though having net liquid assets is a positive position to be in having too many liquid assets is not the most beneficial use of cash as it could be invested and earning a return elsewhere rather than sitting idly in a bank account conversely it can also be used to pay dividends to shareholders there is a fine balance that a company must strike between enough liquid assets and too many liquid assets the general rule of thumb is that if a business has six months of liquid assets to meet short term obligations and cover operating expenses it is in a good position financially example of net liquid assetssay that xyz widgets incorporated has the following components on its balance sheet for current assets and current liabilities current assetscurrent liabilitiesnet liquid assets as of this date would be the negative net liquid position of the company may be a concern but this situation is typical for a retailer still it indicates that the company is not in the best financial position particularly if the economy takes a turn for the worse 