What is the difference between liquidity and liquidation?
Liquidity usually refers to a company’s ability to pay its bills when they become due. Liquidity is often evaluated by comparing a company’s current assets to its current liabilities. Working capital, the current ratio, and the quick ratio are referred to as liquidity ratios or short-term solvency ratios, since their calculations use some or all of the current assets and the current liabilities. Sometimes a company’s accounts receivable turnover ratio, inventory turnover ratio, and free cash flow are also used to assess a company’s liquidity.
Liquidation is a term commonly used when a company sells parts of its business for cash, or when it sells assets in order to pay debts. Liquidation may also involve the winding down or the closing of a business.
Learn more about Financial Ratios.
| Accounting Exams |
| Bookkeeping Test |
| Business Forms |
Comments
5 Responses to “What is the difference between liquidity and liquidation?”
Leave a Reply
 | Free updates with your feed reader (or) receive our monthly Q&A newsletter by filling out the form below: |
Accounting Cheat Sheet
Receive our popular 15-page Cheat Sheet at no cost when
you join our free newsletter:
|
|
70,000+ have already joined We keep your email address 100% safe. | 
|
Most Recent Questions
- What is the difference between actual overhead and applied overhead?
- Is there a difference between an expense and an expenditure?
- If we dispose of an asset, will there be a change in the owner’s equity?
- How do you record the interest that is unpaid on a note payable?
- What to do with the balance in Allowance for Doubtful Accounts?
- What is a credit?
- Is the deposit for a booth at a future trade show an asset?
Questions by Category
- Debits and Credits
- Depreciation
- Financial Accounting
- Financial Ratios
- Improving Profits
- Income Statement
- Inventory and Cost of Goods Sold
- Lower of Cost or Market
- Manufacturing Overhead
- Nonmanufacturing Overhead
- Payroll Accounting
- Present Value of an Ordinary Annuity
- Present Value of a Single Amount
- Standard Costing
- Stockholders' Equity
Why AccountingCoach.com?
AccountingCoach.com is designed to help people without an accounting background easily understand accounting concepts at no cost.
By investing thousands of hours, we have created clear and concise accounting information for both business people and students of all ages.
Read 1,268 Visitor Testimonials
you are really great. thanks for giving clarity all about accounting. thanks a lot!
god bless!
This Accounting coach.com sit is very useful to refresh the knowledge in Accounting. Itis also usefull for those who are attending the interview in Finance and Accounts.
Best Regards,
Kalpana
its great thing that you are doing,thanks for every thing because you keep us updated.
I know understand the main difference between liquidity and liquidation. This will assist me a lot in my accounting career.
please, i want to know the duties of
a cashies and his responsibilities in the bank or companies?
also the duties of an accounting clerk and his responsibilities in a bank or companies?
what is the duties of a marketer in the company?