Liquidity

(redirected from Readily Tradable)
Also found in: Dictionary, Thesaurus, Financial.

Liquidity

 

the mobility of the assets of enterprises, firms, or banks in capitalist countries, ensuring the genuine ability (capability) to pay off within a given period all liabilities and lawful monetary claims.

The degree of liquidity is defined as the ratio between the ready money and quickly salable assets of an enterprise, firm, or bank and the sum of its short-term liabilities. Quickly salable (liquid) assets include government securities, the stocks and bonds of large corporations (which can always be sold on the stock exchange), fixed-term promissory notes of respectable firms (which are accepted without difficulty for discounting and rediscounting by banks), and gold and other precious metals. Also included in calculations of liquidity is assured debtor liability, that is, accounts receivable and the like that can be repayed on first request or within a brief period. Easily salable material-commodity resources are also considered among the liquid assets of industrial and commercial enterprises. The higher the percentage of assets that can be rapidly converted into ready cash, the greater the liquidity of an enterprise, firm, or bank.

The liquidity of commercial banks—the uninterrupted payment of depositor claims—is of particular importance in the capitalist economic system. In order to assure such liquidity, legislation on banking usually establishes the level of cash reserves that commercial banks must maintain in a central bank; the level is determined as a percentage of the total current assets and term deposits and is referred to as a minimum bank reserve.

Business fluctuations and, in particular, economic crises lower the liquidity of enterprises, firms, and banks and lead to many bankruptcies. Under the conditions of the general crisis of capitalism, the liquidity of less powerful banks is declining; they are being absorbed by larger banks, which in turn merge into giant banks.

A specific form of liquidity is international liquidity, defined as the ratio between the gold currency reserves of governments and central banks of the capitalist countries and the sum of their foreign payments that must be guaranteed by these reserves. After World War II this ratio declined, leading to a sharp aggravation of the problem of international liquidity. Circulation related to foreign trade expanded considerably, in terms of physical volume and especially in terms of value. This expansion was a result of general inflation and the rise of prices, combined with an uneven distribution of gold-currency reserves and the relatively stable level of the overall total of these reserves. (This stability is due in part to the depressed price of gold, which was artificially maintained by the USA: prior to December 1971 the price of gold was $35 per troy ounce, after which it rose to $38 and then, in February 1973, to $42.20.)

M. G. POLIAKOV

References in periodicals archive ?
If the employer's stock is not readily tradable on an established market and more than 10% of the plan's assets are invested in employer stock, the plan must give participants voting rights on major corporate issues (generally those involving the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all assets of a trade or business, or similar transactions).
TRA '97 provides a mark-to-market mechanism that allows taxpayers to treat readily tradable securities as if they were sold and reacquired for their market value as of January 2, 2001.
Example: Debra purchased $100,000 worth of FineCorp, a readily tradable stock, in October 2000.
409(1) (2), which allows an employer's common stock to qualify as employer securities if neither the employer nor any member of its controlled group has common stock that is readily tradable, will have until 2013 to comply if the new definition makes the employer ineligible for the special rule because the definition of "readily tradable" now includes securities that are traded on a foreign national securities exchange.
This means that partnership interests cannot be traded or be readily tradable on established securities markets, in secondary markets or their equivalents--IRS notice 88-75 is the primary authority on determination of trading of partnership interests.
For stock that is not readily tradable, the corporation merely has to use a "reasonable application of a reasonable valuation method" (38) Whether or not a method is "reasonable" depends on the usual factors, i.
If a seller receives evidence of indebtedness that is payable on demand or readily tradable, the debt instrument is treated as payment (Section 453(f)(4)).
A publicly traded partnership (PTP) is a partnership whose ownership interests are traded on an established securities market or are readily tradable on a secondary market (or the substantial equivalent thereof).
Under generally accepted industry accounting practices, substantially all of the partnership's property (excluding money), consists of stock, securities, commodities, options, warrants, futures or similar instruments readily tradable on an established securities market.
1(h)(11)(C)(ii) for any dividends paid if its dividend-paying stock is readily tradable on an established securities market in the U.
Demand notes, notes secured by cash (or cash equivalents) and readily tradable corporate or governmental obligations (Temp.
However, under Section 311(e)(1), a taxpayer may elect to treat any capital asset (other than readily tradable stock) or any property used in his trade or business and held on Jan.