Accounts Receivable and Inventory Are Some of the Most Liquid

question 50

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:

Five-Day Week

A work schedule that typically consists of five eight-hour days, totaling 40 hours, usually from Monday to Friday.

Biweekly Salaries

Salaries that are paid every two weeks, totaling 26 payments over the course of a year.

Payday

Payday refers to the specific day on which an employer distributes wages or salaries to employees.

Fiscal Period

A specific period of time used by governments and businesses for accounting and financial reporting purposes.