#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 things like real estate or collectibles are considered illiquid because they take more time and effort to sell. High liquidity means you can quickly access your money when needed, which is essential for both individuals and businesses to cover short-term obligations. In financial markets, liquidity also ensures smoother trading and fairer prices. A lack of liquidity can lead to higher risks, especially during economic uncertainty. Investors and companies monitor liquidity closely to maintain financial stability and avoid potential cash flow problems. In summary, liquidity plays a vital role in financial health and operational efficiency.