Liquidity

Liquidity refers to how easily an asset can be converted to cash without significantly affecting its value. Cash is the most liquid asset, while real estate and equipment are less liquid.

Banks and businesses need adequate liquidity to meet short-term obligations. Liquidity ratios help assess an entity's ability to pay its debts. High liquidity means you can access funds quickly; low liquidity means assets may take time to sell.

Related Terms

Balance

A balance is the amount of money in a bank account at any given time. Banks typically report both th...

Available Balance

Available balance is the amount of money in an account that can be immediately withdrawn or used for...

CD

Certificate of Deposit

A CD is a savings product that holds a fixed amount of money for a fixed period of time (term) and p...

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