#Liquidity101

💧 Liquidity 101: Why It Matters in Finance

What is liquidity?

It’s the ease with which an asset can be turned into cash—without affecting its price.

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🔹 Types of Liquidity

• Market Liquidity: How easily assets (like stocks) can be bought/sold.

• Accounting Liquidity: A company’s ability to cover short-term obligations.

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🔹 Key Liquidity Ratios

1. Current Ratio = Current Assets / Current Liabilities

2. Quick Ratio = (Cash + Securities + Receivables) / Current Liabilities

3. Cash Ratio = Cash / Current Liabilities

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🔹 Why It Matters

• Keeps businesses running smoothly

• Helps investors manage risk

• Required for banks under global regulations (e.g., Basel III)

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🧠 Pro Tip:

Liquidity ≠ Solvency

• Liquidity = Short-term survival

• Solvency = Long-term sustainability

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💬 Want to learn more about liquidity in crypto, banking, or markets? Drop a comment or DM!