#Liquidity101

#Liquidity101

Liquidity is the ability of assets to be quickly converted into cash without a significant loss in value. Cash is the most liquid asset, while assets like real estate and stocks are relatively less liquid. In financial markets, liquidity refers to the ease of buying or selling assets at a fair price. Companies need liquidity to cover their daily obligations such as salaries and bills. Additionally, liquidity is important for investors to assess the ease of exiting an investment. A lack of liquidity leads to greater price volatility, while a liquid market encourages investment. Liquidity is measured through indicators such as the quick ratio or the spread between the bid and ask price. Maintaining good liquidity is key to financial stability for both individuals and institutions.