Liquidity Test
/ˈlɪkwɪdəti tɛst/
Definitions
- (n.) A financial assessment to determine whether an entity has sufficient liquid assets to meet its immediate liabilities.
The court applied the liquidity test to ascertain if the company could pay its debts on time.
- (n.) A criterion used in insolvency law to evaluate whether a debtor is unable to satisfy debts as they become due.
Under the liquidity test, the firm's cash flow was scrutinized to decide on bankruptcy proceedings.
Forms
- liquidity test
- liquidity tests
Related terms
See also
Commentary
The liquidity test specifically focuses on short-term financial health, contrasting with the broader solvency test that considers overall asset-liability balance.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.