#Liquidity101
#Liquidity101: Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its value. Cash is the most liquid asset, while things like real estate or collectibles are less liquid. In finance, high liquidity means smoother transactions and more stable prices. Markets with low liquidity can be volatile, as fewer buyers and sellers lead to price swings. For businesses, liquidity is crucial to meet short-term obligations—often measured through ratios like current or quick ratio. Investors prefer liquid assets during uncertain times for flexibility. Ultimately, understanding liquidity helps in making smarter investment decisions and managing risk effectively. It's a core concept in both trading and financial planning.
