Finance 3 - Homework#3 Part I 1 The problem with liquid assets is that they don't do anything useful other than satisfy immediate needs and wants

Finance 3 - Homework#3 Part I 1 The problem with liquid...

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Homework #3 Part I 1. The problem with liquid assets is that they don't do anything useful other than satisfy immediate needs and wants without the necessity of leveraging debt (credit). While you should definitely have at least some cash on hand for emergencies and daily operating costs/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 and liabilities to ensure the highest ROI possible. Your money needs to always make you more money (increase your bottom line profitability). Another reason it isn't a great idea to be too liquid is because liquid assets are not as protected as other types of assets. Cash is too easy to access and therefore quite easy to find, mismanage, misappropriate, steal or be won in a lawsuit. There are a lot more protections available for other types of assets if these are "hidden" in the proper legal structures.
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  • Summer '19
  • Balance Sheet, Financial Ratio, Generally Accepted Accounting Principles

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