#Liquidity101 Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its price.

Key Points:

High liquidity = Easy to buy/sell with minimal price impact (e.g., cash, stocks of large companies).

Low liquidity = Harder to sell quickly or without a discount (e.g., real estate, rare collectibles).

Types of Liquidity:

1. Market liquidity: How easily assets can be traded in a market (e.g., stock market liquidity).

2. Accounting liquidity: A company's ability to meet its short-term obligations using its current assets.

Examples:

Cash: Most liquid asset.

Stocks: Usually very liquid, especially if heavily traded.

Real estate: Less liquid – it takes time and effort to sell a property.