Current liquidity is the amount of cash you have on hand (or can come up with quickly) compared to your amount of debt.
The amount of cash on hand is easy to figure out, but assets should also be included in the calculation. This is where it gets a little more tricky. Some assets are easy to turn into cash quickly (think stocks which can be sold within minutes), and some are not (think buildings that may take months or years to sell). Marketability also matters – if there’s an active demand for the asset and it can be sold quickly at a high value, then it’s more ‘liquid." Each asset can be assigned a degree of liquidity based on how easily it can be converted to cash.
The simple answer is that if you have cash on hand, you’re more prepared for emergencies and able to seize opportunities that come along! The slightly more complex answer is that it matters to banks and investors. If you want to get a loan, it matters almost as much as your credit score! Your current liquidity ratio is a sign of whether you or your company will be able to pay off the debt.
The current liquidity of your insurance company also matters. If a natural disaster occurs, or even an icy day that leads to multiple car wrecks, you’ll want to know that your insurance company can quickly pay all the claims.
Mylo only partners with top-rated carriers who have high liquidity ratios (meaning they're financially strong) and rank at the top of the industry in their ability to pay claims. We're ready to help you find the right coverage at the best value for auto, home, business, small group benefits, life, health and more.