Trade Receivables and Inventory Are Some of the Most Liquid

question 94

Essay

Trade receivables and inventory are some of the most liquid assets a firm owns and their market values are 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?

---

Definitions:

RRSP

Registered Retirement Savings Plan, a retirement savings and investment vehicle for employees and the self-employed in Canada, offering tax benefits.

Twentieth Year

Referring to the twentieth year in a sequence or duration, often used in the context of anniversaries or timelines.

Annually

Occurring once every year or relating to a period of one year.

RRSP

Registered Retirement Savings Plan, a Canadian investment account designed to save for retirement, offering tax benefits.