Accounts Receivable and Inventory Are Some of the Most Liquid

question 100

Essay

Accounts receivable and inventory are some of the most liquid assets a firm owns and their market value is typically fairly close to book value. Even so, in the eyes of many lenders, these assets make for inadequate collateral on loans, particularly if the business looking to borrow the money is in a liquidity crisis. Why do you think this is the case?

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Definitions:

Reliability

The degree to which a test, tool, process, or system consistently produces the same results under the same conditions.

Reliability

The consistency of a measurement, test, or instrument to produce stable and consistent results over time.

Measuring

The process of determining the size, quantity, or degree of something using instruments or tools designed for such purposes.

Correlation Coefficients

Statistical measures that indicate the extent to which two variables fluctuate together, showing the strength and direction of their relationship.