Liquidity
Content
Definition
Liquidity is the ease with which an asset, or security, can be converted into ready cash without affecting its market price.
Usage and Context
Liquidity is important in business and investing. It means you can sell something fast without losing money on the deal.
Frequently asked questions
- What does liquidity mean in simple terms? Liquidity means how quickly and easily something can be sold for cash without dropping in price.
- How does liquidation preference work? Liquidation preference sets a payment order for when a company ends or is sold. Investors with this preference get their investment back before other shareholders.
- How does liquidity affect the market? High liquidity in the market means assets can be bought and sold quickly. This makes the market more active and prices more stable.
Benefits
Good liquidity helps businesses meet their short-term needs and obligations. It makes managing cash flow easier and supports steady growth.
Conclusion
Liquidity is an important aspect of financial health. It ensures you can quickly turn assets into cash, offering stability and flexibility in business operations.
