#Liquidity101

Liquidity 101 refers to the foundational understanding of liquidity in finance—the ability of an asset or entity to quickly convert assets into cash without significantly affecting its market price. High liquidity means assets can be sold rapidly, such as stocks or cash equivalents, while low liquidity assets, like real estate, take longer to convert. For businesses, liquidity is crucial to meet short-term obligations and maintain operational stability. Key metrics include the current ratio and quick ratio, which assess a company’s ability to cover liabilities. Understanding liquidity helps individuals and businesses manage risk, avoid insolvency, and make informed investment and budgeting decisions.