Liquidity101 is a term commonly used to refer to a simplified explanation of the concept of "liquidity" in the world of finance and investment. Here is a simplified explanation of this concept:

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💧 What is Liquidity?

Liquidity refers to how easily an asset (like real estate, stocks, or goods) can be converted into cash quickly, without losing much of its value.

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🏦 Types of Liquidity:

1. Cash Liquidity:

Like the cash in your pocket or in your bank account.

It is considered the highest liquidity because you can use it directly.

2. Liquidity in Assets:

Like gold or stocks.

They can be sold easily but their value can be affected by market supply and demand.

3. Illiquid Assets:

Like real estate or businesses.

They take a long time to sell and are often less liquid.

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📊 Why is Liquidity Important?

High liquidity = speed in acting during crises.

Companies with good liquidity can easily meet their obligations.

A smart investor always pays attention to the level of liquidity before making a decision.

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🧠 A Simple Example:

If you have a car worth 100,000 riyals, but it takes months to sell it = low liquidity.

But if you have the same amount in your bank account = high liquidity.