Homework #3Part I1.The problem with liquid assets is that they don't do anything useful other than satisfyimmediate needs and wants without the necessity of leveraging debt (credit). While youshould definitely have at least some cash on hand for emergencies and daily operatingcosts/expenses, assets are much more effective and useful when they are working for you.Healthy businesses perform best when they leverage their cash and debt assets andliabilities to ensure the highest ROI possible. Your money needs to always make youmore money (increase your bottom line profitability).Another reason it isn't a great idea to be too liquid is because liquid assets are not asprotected as other types of assets. Cash is too easy to access and therefore quite easy tofind, mismanage, misappropriate, steal or be won in a lawsuit. There are a lot moreprotections available for other types of assets if these are "hidden" in the proper legalstructures.