Liquid asset

A liquid asset is an asset that can be quickly converted to cash at or near its market value — cash and cash equivalents, marketable securities, short-term government bonds. Liquidity is a spectrum: cash is perfectly liquid, while real estate and private company equity are highly illiquid. In financial due diligence, the composition and quality of a company's liquid assets are analysed to assess immediate payment capacity and working capital health. In valuation, excess liquid assets above operating needs are added back to the equity value as cash-like items in the EV-to-equity bridge.

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Example: a Swiss holding company presents CHF 8.5 million of financial assets comprising: CHF 3.2 million of operating cash, CHF 2.0 million of short-term government bonds and CHF 3.3 million of a listed equity portfolio. The CHF 5.3 million of non-operating liquid assets (bonds + listed equity) are treated as cash-like items in the acquisition price bridge — increasing the equity value paid to shareholders by CHF 5.3 million relative to the enterprise value.

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Hectelion identifies and values liquid assets in every acquisition price bridge analysis, distinguishing operating cash needs from excess liquidity.