The term that describes funds readily available for immediate use is liquid assets. Liquid assets are those that can be quickly converted into cash without any significant loss in value. This typically includes cash itself, as well as assets like checking and savings accounts, stocks, and other marketable securities that can be easily sold in financial markets.
The importance of liquidity lies in a person's or business's ability to meet immediate financial obligations. For example, if someone needs to make a purchase or pay a bill, having liquid assets allows for swift access to cash. In contrast, illiquid assets, such as real estate or collectibles, take more time and effort to convert into cash and typically involve a sale process that may not yield immediate funds.
Fixed assets are long-term tangible property like buildings and machinery, which are not intended for immediate cash conversions. Invested assets usually refer to those that have been put into investment vehicles but may not necessarily be liquid and could include stocks or bonds that may take time to sell.
Understanding the differentiation between these types of assets is crucial in personal finance and business management, particularly regarding cash flow management and financial planning.