"Liquidity 101" refers to the basic concept or initial understanding of liquidity. Liquidity in general is the ability of an asset or investment to be easily converted into cash or other assets without significantly affecting the market price.
Here are some things to understand related to liquidity:
What is liquidity?
Liquidity is how easily an asset can be bought or sold without causing significant price changes.
Why is liquidity important?
Liquid assets can be easily converted into cash, making it easier for investors to meet short-term obligations or take advantage of other investment opportunities.
Examples of liquidity:
Cash is the most liquid asset. Assets like stocks, bonds, and digital currencies also have high liquidity, but not as high as cash.
Implications of liquidity in business:
Companies with good liquidity can meet their short-term obligations, such as payroll, debts, and taxes.
Liquidity in financial markets:
Good liquidity creates an efficient market, where asset prices are easily determined and investors can transact without excessive risk.
Types of liquidity:
There are various types of liquidity, including asset liquidity, corporate liquidity, and market liquidity.
Liquidity ratios:
Liquidity ratios are used to measure a company's ability to meet its short-term obligations. Examples of liquidity ratios include the current ratio and the quick ratio.