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#Liquidity101 Liquidity101 refers to understanding the basics of liquidity in finance. Here's a quick rundown:
*What is liquidity?*
Liquidity refers to how easily an asset can be bought or sold without significantly affecting its price. In other words, it's a measure of how quickly you can convert an asset into cash.
*Types of liquidity:*
1. *Market liquidity:* The ability to buy or sell an asset quickly and at a fair price.
2. *Accounting liquidity:* A company's ability to pay its short-term debts.
*Importance of liquidity:*
1. *Financial stability:* Liquidity helps individuals and companies weather financial shocks.
2. *Investment flexibility:* Liquid assets can be easily sold to take advantage of new investment opportunities.
*Common liquidity metrics:*
1. *Current ratio:* Current assets / Current liabilities
2. *Quick ratio:* (Current assets - Inventory) / Current liabilities
Want more details or specific examples?
