#Liquidity101

High liquidity = can be quickly sold with little to no price impact (e.g., cash, stocks of large companies).

Low liquidity = harder to sell quickly without taking a loss (e.g., real estate, rare collectibles).

Types of Liquidity

Market Liquidity

How easily assets can be bought/sold in a market.

Example: The stock market has high market liquidity for large-cap stocks.

Accounting (or Balance Sheet) Liquidity

How easily a company or individual can meet short-term obligations.

Measured using ratios like Current Ratio or Quick Ratio.

Funding Liquidity

The ability of a firm or bank to access cash or funding when needed.