Liquidity Refers to How

question 55

Multiple Choice

Liquidity refers to how:

• A) easy an asset is to convert immediately to cash without losing value.
• B) quickly the same dollar changes hands in the economy.
• C) quickly the average household spends its disposable income.
• D) easy money converts to assets in an economy.

---

Definitions:

Loan Covenants

Agreements between a borrower and a lender that the borrower must comply with to remain in good standing.

Principal and Interest

The original amount of a loan (principal) combined with the cost of borrowing that money (interest).

Financial Covenants

Agreements between a borrower and lender setting specific financial ratios or milestones the borrower must maintain.

Minimum Financial Tests

Financial benchmarks or ratios a company must achieve or maintain to comply with certain agreements, often related to debt covenants.