#Liquidity101

Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its price. Cash is the most liquid asset, while real estate, for example, is less liquid due to the time and effort required to sell. In financial markets, liquidity is crucial because it ensures smooth trading and stable prices. A liquid market has many buyers and sellers, tight bid-ask spreads, and high trading volumes. For businesses, liquidity also refers to having enough cash or easily accessible funds to meet short-term obligations. Strong liquidity indicates financial health and operational flexibility, while poor liquidity can signal potential trouble.