#Liquidity101

Liquidity refers to how easily an asset can be converted into cash without affecting its market price. Cash is the most liquid asset, while real estate and collectibles are less liquid. In finance, liquidity is crucial for individuals, businesses, and markets to meet short-term obligations. A liquid market has many buyers and sellers, enabling quick trades. Companies monitor liquidity to ensure they can cover expenses and avoid insolvency. Common measures include the current ratio and quick ratio. High liquidity offers flexibility and security, while low liquidity can pose risks. Understanding liquidity helps in making smart investment and financial decisions.