#Liquidity101 Liquidity*

Liquidity refers to how easily assets can be converted into cash without losing value. Cash is the most liquid asset, while items like real estate or collectibles are considered less liquid. In personal finance, having liquidity means being able to access money quickly for emergencies or expenses. In business, it means a company can meet short-term obligations like bills or salaries.

There are two types of liquidity: market liquidity and accounting liquidity. Market liquidity deals with how quickly an asset can be sold (like stocks), while accounting liquidity measures a company’s ability to pay off debts using its current assets.

High liquidity offers flexibility and security, but too much unused cash may mean missed investment opportunities. Understanding liquidity helps in making smart financial decisions, balancing safety with growth.