#Liquidity101 Why Is Liquidity Important?

Strong liquidity ensures financial flexibility and stability. It allows organizations and individuals to:

Pay off short-term debts

Seize investment opportunities

Handle unexpected expenses

Prevent financial distress or insolvency

Types of Liquidity

Market Liquidity: The ease with which assets can be bought or sold in a market without causing drastic price changes.

Accounting Liquidity: A company’s ability to cover short-term liabilities using liquid assets.

Financial Liquidity: The general ability to quickly convert assets into cash