#Liquidity101

Financial liquidity is the extent to which cash is available to a company or individual, or the ease and speed of converting financial assets into cash available for immediate use, without incurring significant losses in value; that is, the level of financial liquidity is determined by the amount of cash currently available, in addition to financial assets that can be easily converted to cash within a short period.

Financial assets are items of financial value that can be easily traded, such as: cash, stocks, bonds, and bank deposits. Although these assets are not considered to have material value in themselves, like land and buildings, their value depends on the level of demand for them in the market; for example, the value of stocks may rise and may also significantly fall depending on market conditions.

Financial liquidity is extremely important; it reflects the ability of a company or individual to meet its financial obligations and urgent costs with ease; the higher the liquidity, the better.