What's Happening?
Liquidity refers to the ability of a company or individual to settle short-term liabilities efficiently. It is a key indicator of financial health, reflecting how quickly assets can be converted into cash without losing value. In the financial world,
liquidity also measures the ease of buying or selling assets in a market. High liquidity is characterized by active trading and low price volatility, allowing transactions to occur quickly and at low costs. Different forms of liquidity include company liquidity, market liquidity, and bank liquidity.
Why It's Important?
Liquidity is essential for financial stability and flexibility, enabling companies and individuals to overcome financial challenges and seize economic opportunities. High liquidity ensures that businesses can meet ongoing obligations, such as payroll and supplier payments, without relying on external funding. It also allows for quick responses to market changes and investment opportunities, contributing to overall financial health and strategic decision-making.
