Liquidity is how quickly you can turn an asset into cash without losing value. Think of it like selling a popular stock versus a rare collectible. Cash is the most liquid; real estate, less so. High liquidity means easy, fast trades with stable prices, like on major stock exchanges. Low liquidity can lead to price swings or delays. Companies track liquidity to meet short-term bills using ratios like current or quick ratios. For investors, liquid markets reduce risk and costs. Understanding liquidity helps you make smarter financial decisions, ensuring flexibility and stability in trading or managing cash flow.
