#Liquidity101 Liquidity is a company's ability to convert assets to cash or acquire cash—through a loan or money in the bank—to pay its short-term obligations or liabilities.

Liquidity is the term used in finance to refer to how easy it is to convert an asset to cash and not affect its market price.

KEY TAKEAWAYS

Liquidity refers to the ease with which an asset, or security, can be converted into ready cash without affecting its market price.

The two main types of liquidity are market liquidity and accounting liquidity.

Current, quick, and cash ratios are most commonly used to measure liquidity.