#Liquidity101 Liquidity refers to how easily an asset can be converted into cash without significantly affecting its market value. It's a crucial concept in finance, economics and everyday life. There are different types of liquidity, including:

- *Market Liquidity*: The ease of buying or selling an asset in a market without drastically changing its price. Highly liquid markets have many buyers and sellers, transparent pricing and stable economic conditions.

- *Accounting Liquidity*: A company's ability to meet its short-term obligations using financial ratios like the current ratio (current assets ÷ current liabilities) and quick ratio (current assets - inventory ÷ current liabilities).

- *Funding Liquidity*: A company's ability to access cash or loans to meet its financial obligations.

High liquidity allows for efficient price discovery, facilitates investment decisions and helps businesses manage day-to-day operations. Investors consider liquidity when evaluating assets, and companies with high liquidity are better equipped to handle financial challenges.