#Liquidity101

Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its price. In financial markets, high liquidity means there are many buyers and sellers, allowing for smooth and efficient trading. For example, stocks of large companies are highly liquid, while real estate is less so. Liquidity is crucial for investors because it affects their ability to enter or exit positions quickly. In business, maintaining liquidity helps companies meet short-term obligations and avoid insolvency. Understanding liquidity is essential for risk management and effective financial planning in both personal and corporate finance.