#Liquidity101 Liquidity 101

Liquidity refers to how quickly and easily an asset can be converted into cash without affecting its market price. Cash is the most liquid asset, while things like real estate are less liquid. In business, liquidity indicates a company’s ability to meet short-term obligations using current assets. Common measures include the current ratio and quick ratio. High liquidity reduces financial risk and helps companies manage unexpected expenses or opportunities. In financial markets, liquidity means the ease of buying or selling assets. Higher market liquidity leads to tighter spreads, lower volatility, and more efficient pricing. It’s vital for financial stability.