Liquidity refers to how quickly and easily an asset can be converted into cash without affecting its market price. In financial markets, high liquidity means there are many buyers and sellers, allowing for fast transactions with minimal price fluctuations. Assets like stocks and cash are highly liquid, while real estate or collectibles are less so. For businesses, liquidity also indicates the ability to meet short-term obligations, measured by ratios like the current or quick ratio. In volatile markets, liquidity can dry up quickly, increasing risk. Investors and companies closely monitor liquidity to ensure financial stability and operational efficiency. #Finance #Investing