Liquidity
Ease with which an asset can be converted into cash without affecting its market price, a measure of financial flexibility.
Ease with which an asset can be converted into cash without affecting its market price, a measure of financial flexibility.
Introduction: Liquidity refers to the ease with which assets can be converted into cash without significantly affecting their value. In the financial context, liquidity is a critical aspect of financial health, affecting individuals, businesses, and markets. High liquidity levels enable quick asset conversion to meet immediate obligations, reflecting positively on a company's solvency and operational agility. For markets, liquidity ensures smooth transactions without large price fluctuations. Managing liquidity involves balancing liquid assets to meet short-term liabilities and optimizing cash flow to support ongoing operations and investments.
Types of Liquidity:
Strategies for Managing Liquidity: