#Liquidity101 Understanding Liquidity

Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its price. Cash is the most liquid asset, while real estate and collectibles are considered less liquid. In financial markets, high liquidity means assets can be bought or sold rapidly with minimal price fluctuations. It’s a critical factor for investors and businesses, ensuring they can meet short-term obligations and seize opportunities. Poor liquidity can lead to delays or losses during sales. In summary, strong liquidity provides flexibility and financial stability, making it a key indicator of financial health.