What is "Liquidity" meaning?

Liquidity in business and finance measures how quickly and efficiently an asset can be turned into cash. Highly liquid assets, like money in a bank account, are easily accessible. Less liquid assets, such as real estate or long-term investments, take more time to convert into usable funds.

Example

"Startups often monitor their liquidity closely to ensure they can cover operational costs during funding gaps."

How is "Liquidity" used in business?

In business, liquidity is a key metric for assessing financial health. It helps determine whether a company can meet its short-term obligations. Businesses with high liquidity are better positioned to handle emergencies, invest in opportunities, or adapt to market shifts.

Pro Tip

Regularly track your liquidity ratio to maintain enough cash flow for operations while still investing strategically in growth.

Related Terms

Cash Flow, Working Capital, Assets, Liquidity Ratio