Investopedia

Continue to Site »

Liquidity Cushion

Filed Under » , ,
Dictionary Says

Definition of 'Liquidity Cushion'

A reserve fund for a company or individual made up of highly liquid investments. A liquidity cushion relates to a business or individual holding an ample amount of cash, or other highly liquid assets, in relation to debt, so that a short-term liquidity crunch or other unexpected event will not lead to potentially disastrous consequences.
Investopedia Says

Investopedia explains 'Liquidity Cushion'

By maintaining cash reserves in money market instruments, unexpected demands on cash don't require the immediate sale of other less liquid securities, which in most cases would not be in the business's or individual's best interest to sell in order to raise cash. For all intents and purposes, liquidity cushion can also be known as a "rainy day fund."

Articles Of Interest

  1.

    The Working Capital Position

    Learn how to correctly analyze a company's liquidity and beat the average investor.

  2. Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.

  3. Diversification Beyond Stocks

    If you think holding several stocks means you're diversified, think again - there's much more to be done to reduce portfolio risk.

  4. Where do companies keep their cash?

    If you have ever looked over a company's balance sheet, you have no doubt noticed the first account under the current asset section is cash and cash equivalents. The cash account contains, as ...

  5. Basic Investment Objectives

    You might know about different asset types, but do you know how each type contributes to a particular goal?

  6. Earnings Guidance: Can It Accurately Predict The Future?

    Explore the controversies surrounding companies commenting on their forward-looking expectations.

  7. The Path To Becoming A CEO

    Think you have what it takes to be chief executive? Find out what those at the top have in common.

  8. Depreciation: Straight-Line Vs. Double-Declining Methods

    Appreciate the different methods used to describe how book value is "used up".

  9. Financial Statement: Extraordinary Vs. Nonrecurring Items

    When it comes to analyzing a company, successful analysts spend considerable time differentiating between accounting items that are likely to recur going forward from those that most likely will ...

  10. Wall Street’s Glass Ceiling

    It’s tough to boast that there are more female CEOs than ever before when they make up only 4.2% of the total.
comments powered by Disqus
Marketplace
Hot Definitions

  1. Validation Period

    The amount of time necessary for the premium on an insurance policy to cover the commissions, the cost of investigation, medical exams and other expenses associated with the issuance of the policy.

  2. Winner's Curse

    Because of incomplete information, emotions or any other number of factors regarding the item being auctioned, bidders can have a difficult time determining the item's intrinsic value. As a result, the largest overestimation of an item's value ends up winning the auction.

  3. Glocalization

    A combination of the words "globalization" and "localization" used to describe a product or service that is developed and distributed globally, but is also fashioned to accommodate the user or consumer in a local market.

  4. Disaster Loss

    A special type of tax-deductible loss, similar to a casualty loss, where a loss has been incurred by taxpayers who reside in an area that has been designated as a federal disaster area by the President.

  5. Fool In The Shower

    The notion that changes or policies designed to alter the course of the economy should be done slowly, rather than all at once.

  6. Pattern Day Trader

    An SEC designation for traders who trade the same security four or more times per day (buys and sells) over a five-day period, and for whom same-day trades make up at least 6% of their activity for that period.
Trading Center