Difference between current assets and liquid assets

Liquid assets are thought of as current assets, but in practical the two terms are different. Yes, it would be wise to say that all liquid assets are part of current assets too.

Now the question arises:

What is the difference between current assets and liquid assets?

The main difference between current assets and liquid assets arises due to period of liquidity. Subsequent paragraph can be refer for the same:

Current assets: Current assets are assets which can be converted into cash within a period of one year. These assets include cash, bank balance, accounts receivable, inventory, prepaid expenses etc.



Liquid assets: Liquid assets are considered more liquid than current assets in sense that these assets can be converted into cash within a very short time (90 days). Liquid assets include current assets like cash, bank balance, accounts receivable etc. and excludes inventory and prepaid expenses.

Liquid assets are assumed to be converted into cash at any point of time. That’s the reason why inventory (as it is difficult to convert, when needed) and prepaid expenses (cannot be converted into cash at all) are not considered as liquid assets.

Author: Vikas Yadav

Vikas Yadav is the chief author at MonetarySection. He is an MBA (finance) from NCU Gurgaon. He started his career in 2014 and at the same time he started this website to educate people about finance.