What is meant by liquidity? Rank the following assetsfrom one to five in order of liquidity. (a) Goodwill. (b) Inventory. (c) Buildings. (d) Short-term investments. (e) Accounts receivable.

Answer: It is the order according with the liquidity grade

(e) accounts receivable

(b) inventory

(d) Short-term investments

(c) Buildings

(a) goodwill

Explanation:

The liquefy reflects of means how easy is transform every one of the accounts mentioned in the assets or in the exercise in cash, depending of the nature of the account and the different resources in the market you can estimate their liquity. The accounts receivable is more liquidity, because you can charge to your costumers right now or trough factoring make immediately cash the bills, the factoring is when some company purchase your bills with by lower amount of money and you receive cash. secondly the inventory, because first you need to get client and make effective sales, all of it takes more time. The short-term investments, you need to wait until the deadline of the investment finish to receive the money. Buildings as you now require more time effort to sold and the good will that need be valued and agree with a price, it's something that isn't easy to sell, and many times it probably that you sell all the company with it.