When working in the business world, almost everything with a dollar value is categorized as a liquid or non-liquid asset. The distinction is important and plays a valuable role in your business strategy. Having a strong supply of liquid assets is important to successfully running a business. Knowing what makes an asset liquid, how to find your liquid assets and the benefits of having them can push your Amazon business into success.
What Are They?
A liquid asset can be simply defined as anything that can easily be converted into a different form of wealth. Cash is the purest form of liquid assets, because it is immediately converted into goods.
Other liquid assets can be more difficult to define, as there are few generalizations. Inventory that has a high turnover rate can be counted as a liquid asset, but specialty pieces with few buyers are not.
If a product has a ready market at any time, it is a liquid asset because it could be converted into cash in a short time with little notice. Slower turnover investments such as real estate or high end jewelry take much more time to be converted and do not qualify as liquid assets.
Hidden Liquid Assets
By taking stock of your inventory or bank account, you can identify a good portion of your liquid assets. However, in many businesses there are also hidden liquid assets that require a little extra digging before they can be counted.
Reserved or unpaid funds are one of the most common types of hidden liquid assets. In an Amazon business, not all your FBA funds will be paid out immediately. This money, combined with third party payouts, requires some accounting to be counted as a liquid asset.
Other forms of hidden liquid assets include physical bills or uncashed checques, savings accounts, lines of credit and even some investments. By staying aware of your hidden liquid assets, you can better plan and invest in your business’ future. Knowing when money is available can be the difference between success and disaster.
Benefits of Building Liquid Assets
Liquid assets are valuable for building and sustaining your business. In order to create a strong marketing front, continue investing in stock and pay any employees, liquid assets must be kept available.
Your level of liquid assets can also provide a general guide to how well your business is doing, with the exception of slow turnover by high reward business. Liquid assets can give an indication of how well your stock sells and your business growth.
By watching your liquid assets, you can know when to invest and potentially which stock will provide the best reward. With liquid assets as a business meter, you can closely monitor and respond to any shifts in your business.
Liquid assets are the heartbeat of a business. Whether easily viewable and accessible in bank accounts and inventory sheets or hidden in other areas, they are essential to your success. Acting as a measure of your business success, liquid assets can provide stability during any shifts in your business and provide you with a chance to switch tactics and respond appropriately. To learn more about liquid assets and their uses, visit Wizards of Ecom.