#Liquidity101

**Liquidity 101**

Liquidity refers to how easily an asset can be converted into cash without significant loss in value. High liquidity means an asset can be sold quickly (like stocks or cash), while low liquidity applies to assets like real estate, which take time to sell.

In financial markets, liquidity ensures smooth trading with minimal price impact. Companies also need liquidity (cash or quick assets) to cover short-term obligations. Key metrics include the current ratio and quick ratio.

Central banks monitor liquidity to stabilize economies, while investors assess it to manage risk. Poor liquidity can lead to financial distress, making it a crucial concept in finance.