#Liquidity101 Liquidity 101

Liquidity refers to how easily an asset can be converted into cash without affecting its market price. Cash is the most liquid asset, while real estate and collectibles are less liquid. In finance, companies need liquidity to meet short-term obligations and avoid financial distress. Investors also value liquidity, as it allows them to buy or sell assets quickly. High liquidity usually means a stable, efficient market with many buyers and sellers. Low liquidity can lead to price volatility and delays in transactions. Understanding liquidity helps individuals and businesses manage risk, maintain operations, and make informed financial decisions.