Liquidity

The ease with which an asset can be converted into cash without affecting its market price.

financeinvestingeconomics

Liquidity

Liquidity measures how quickly and easily an asset can be converted into cash. Highly liquid assets include cash and stocks, while real estate and collectibles are less liquid.

  • Market Liquidity: The ability to buy or sell assets without significant price impact.
  • Accounting Liquidity: A company's ability to meet short-term obligations.

Key Points

1

Higher liquidity means faster access to cash.

2

Illiquid assets may take time to sell without loss.

3

Liquidity is essential for emergency funds and risk management.

Last Updated: 3/16/2025

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