#Liquidity101

💧 Liquidity 101

Understanding the Lifeblood of Financial Market.

🔹 What is Liquidity?

Liquidity refers to how easily an asset can be bought or sold without affecting its price

🔹 Types of Liquidity:

1)High Liquidity: Easily traded (e.g., cash, stocks

of large companies)

2)Low Liquidity: Harder to trade (e.g., real estate, collectibles)

🔹 Why Liquidity Matters:

✅ Quick access to cash

✅ Lower transaction costs

✅ Stable prices

✅ Efficient markets.

🔹 Liquidity in Action:

Stock Market: More buyers & sellers = higher liquidity

Crypto: Highly volatile due to lower liquidity

Real Estate: Takes time to sell = low liquidity.

🔹 Liquidity Ratios (For Businesses):

Current Ratio = Current Assets ÷ Current Liabilities

Quick Ratio = (Current Assets – Inventory) ÷ Current Liabilities.

🔹 Tips to Improve Liquidity:

1.Maintain a cash reserve

2.Reduce unnecessary inventory

3.Speed up receivables

4.Negotiate better payment terms.

📌 Takeaway:

> Liquidity = Flexibility + Stability + Security

In investing and business, strong liquidity keeps everything flowing smoothly.