Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

7. Receivables and Investments

Types of Receivables

Financial Accounting

7. Receivables and Investments

Types of Receivables

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Multiple Choice

Consider the relative liquidity of the following assets: accounts receivable, notes receivable, and inventory. Which of these is generally considered the most liquid after cash?

Inventory

Notes receivable

Accounts receivable

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Verified step by step guidance

Understand the concept of liquidity: Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its value. Cash is the most liquid asset, followed by assets that can be quickly converted into cash.

Analyze accounts receivable: Accounts receivable represents amounts owed to the company by customers for goods or services provided on credit. These are typically collected within a short period, making them relatively liquid.

Analyze notes receivable: Notes receivable are formal written promises to pay a specific amount at a future date. While they are more liquid than long-term assets, they are less liquid than accounts receivable because they often have longer collection periods.

Analyze inventory: Inventory consists of goods held for sale. It is the least liquid of the three because it must first be sold and then converted into accounts receivable or cash, which can take time.

Conclude the ranking: After cash, accounts receivable is generally considered the most liquid asset among the three, followed by notes receivable, and then inventory.