Need of Liquid Assets

In a broader sense, liquidity is an universal requirement both people and organizations. Need of liquid assets in day-to-day business operations is not deniable, which is to accommodate expected and unexpected fluctuations in the balance sheet. 

Under the market situation which is less developed and illiquid, firms or corporations are required to keep a relatively high level of liquid assets even yield little or income. At least, 10% - 20% of total asset must be kept in the liquid form.

Example of highly liquid assets is cash balances such as bank notes, gold coin and bullion.

Due to the increasing market orientation, the growth of financial markets and the greater diversity of financial instrument worldwide, the bank or financial institutions no need to hold large amounts of liquid assets, may be about 5%.

However, determination of liquidity sometimes depends on the market and economic performance where certain assets that appear liquid in good times may not be liquid in more difficult periods.