ADMS 3541 Lecture Notes - Lecture 5: Market Liquidity, Quick Ratio, Savings Account

• School: York University
• Department: Administrative Studies
• Course: ADMS 3541
• Professor: chris

Document Summary

Financial ratios are a means to track and measure a household"s financial progress. Think of financial ratios as a financial thermometer. After completing a balance sheet and cash-flow (income) statement, a household is ready to analyze their personal finances. Liquidity: the speed and ease with which an asset can be converted to cash. Liquid assets generally include assets that are cash-based. For example, the current value of your checking or savings account would be considered a liquid asset. Illiquid assets, on the other hand, are assets that are difficult to convert to cash. There is some judgment to be exercised when deciding whether to classify an asset as a liquid or illiquid asset. For example, tax free savings accounts (tfsas) could be classified as either liquid or illiquid. This would depend on the household"s intended use for the accounts. If the tfsas are meant as savings accounts for near-term needs, then they might be considered liquid assets.