Future Business Leaders of America (FBLA) Agribusiness Practice Test

Disable ads (and more) with a membership for a one time $4.99 payment

Enhance your FBLA Agribusiness knowledge with our comprehensive test. Dive into flashcards and multiple-choice questions, complete with hints and explanations, to ensure exam success. Prepare confidently for a bright future!

Start Multiple Choice Practice Test
Start Flash Cards

Practice this question and more.

Which factor determines the liquidity of an asset?

  1. Its market share value

  2. How quickly it can be converted to cash

  3. The amount of income it generates

  4. Its historical value

The correct answer is: How quickly it can be converted to cash

The liquidity of an asset is primarily determined by how quickly it can be converted to cash. An asset is considered liquid if it can be sold or converted into cash rapidly without a significant loss in value. Cash itself is the most liquid asset, while others, such as real estate or collectibles, take longer to sell and may incur losses due to market fluctuations or other factors. Market share value, the amount of income an asset generates, and its historical value do not directly measure liquidity. Market share value pertains to a company's total shares in the market rather than the liquidity of individual assets. Income generation is an important characteristic of an investment but does not dictate how easily it can be sold for cash. Historical value indicates what an asset was worth in the past, but it does not reflect its current liquidity status. Thus, the speed of conversion into cash is the essential characteristic that defines liquidity.

More Questions Like This