Illiquid Assets Definition

Illiquid Assets are Assets that are difficult to convert in to cash.

Illiquid Assets refer to any Assets a company may own that are of great difficulty to sell. The reasons for which an Illiquid Asset will be difficult to sell can include; a lack of interested buyers or investors, no established market for the Asset to be traded on and more. Some common examples of Illiquid Assets are land, builidings, interests in private companies and collectables.

Illiquid Assets act in opposite of Liquid Assets which refer to cash on hand as well as any Assets that can be quickly converted into cash, with little or no impact on price. Illiquid Assets on the other hand, pose an immense challenge when trying to sell and often leads to discrepancy between the Assets fair value and the price it will be sold at. This inevitably leads to a loss.

Illiquid Assets are seen to carry a level of high risk which especially forms in times of uncertianty in the markets making them impossible to sell without a heft discount leading in a company getting back less than they had paid. This is unlike Liquid Assets which can be seen of great importance being a readily source of cash to meet any payment obligations or should the sudden need for it arise, they also add to a company's capacity to seek additional finances. 

You may also be interested in: