#Liquidity101 Khi a property can be effectively converted into cash without affecting its market value, it is considered a liquid asset. The ability to convert quickly and efficiently is called liquidity. Therefore, the availability of cash to make such conversions is the largest influence on whether a market can operate efficiently. The more liquid the asset, the easier and more efficient it is to convert back to cash. Less liquid assets take longer and may incur higher costs.

Liquidity describes the extent to which an asset can be bought or sold quickly in the market at a price that reflects its intrinsic value. Tangible assets, such as real estate, fine art, and collectibles, are relatively less liquid. Other financial assets, from stocks to partnership units, lie at various positions on the liquidity spectrum.