DECA Marketing Cluster Practice Exam

Which type of asset can be quickly converted into cash with minimal loss?

1. Fixed Asset

2. Liquid Asset

3. Immovable Asset

4. Intangible Asset

The correct answer is: Liquid Asset

Liquid assets are those that can be easily and quickly converted into cash without a significant loss in value. This characteristic is crucial for individuals and businesses that need to meet short-term financial obligations, as it provides them the flexibility to respond to financial needs rapidly. Examples of liquid assets include cash itself, checking accounts, and investments like stocks and bonds that can be sold rapidly on the market. The liquidity of these assets is a key factor that distinguishes them from other types of assets. In contrast, fixed assets, which include property, buildings, and machinery, typically cannot be quickly sold and often require a longer timeframe to convert into cash. Immovable assets, such as real estate, also tend to have substantial conversion timeframes and face market risk. Intangible assets, like patents or trademarks, while they may have significant value, often lack the same level of liquidity and can be challenging to sell quickly at a known price. So, the definition and nature of liquid assets align perfectly with the requirement of being quickly convertible to cash with minimal loss, making it the most accurate answer in this context.