liquidity

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Liquidity

In context of securities, a high level of trading activity, allowing buying and selling with minimum price disturbance. Also, a market characterized by the ability to buy and sell with relative ease.
In context of a corporation, the ability of the corporation to meet its short-term obligations. Measured with liquidity ratios like current ratio, quick ratio, and cash ratio.
Antithesis of illiquidity.

Liquidity

Easy convertibility into cash. A liquid asset or security can be easily bought or sold with little or no impact on price. Most methods of counting money supply include some highly liquid investments such as certificates of deposit. Liquid assets and investments are highly desirable as they may be sold to allow an investor to enter other investments as they arise. On exchanges, liquid investments usually have low bid-ask spreads. See also: Illiquid, Liquidity preference hypothesis.

liquidity

A large position in cash or in assets that are easily convertible to cash. High liquidity produces flexibility for a firm or an investor in a low-risk position, but it also tends to decrease profitability.

Liquidity.

If you can convert an asset to cash easily and quickly, with little or no loss of value, the asset has liquidity. For example, you can typically redeem shares in a money market mutual fund at $1 a share.

Similarly, you can cash in a certificate of deposit (CD) for at least the amount you put into it, although you may forfeit some or all of the interest you had expected to earn if you liquidate before the end of the CD's term.

The term liquidity is sometimes used to describe investments you can buy or sell easily. For example, you could sell several hundred shares of a blue chip stock by simply calling your broker, something that might not be possible if you wanted to sell real estate or collectibles.

The difference between liquidating cash-equivalent investments and securities like stock and bonds, however, is that securities constantly fluctuate in value. So while you may be able to sell them readily, you might sell for less than you paid to buy them if you sold when the price was down.

liquidity

the possession by a person or business of a stock of monetary assets which can be used directly to finance the purchase of goods and services and capital assets. See MONEY, MONEY SUPPLY.

liquidity

the extent to which an ASSET can be quickly and completely converted into CURRENCY (notes and coin) in order to be used as a means of payment. Monetary assets (see MONEY) are the most liquid since they are widely acceptable as a medium of exchange, while durable and highly specific assets, such as a machine, are the least liquid since such assets can be converted into money only after a willing buyer has been found and a money value placed on the asset.

liquidity

The ability of a person or company to readily and easily obtain cash from its assets in order to meet obligations or make purchases.

References in periodicals archive ?
12 prescribes the present procedures for accounting for MES, which are readily tradeable investments in preferred and common stock.
Payments with respect to a corporation in which no stock was readily tradeable.
Section 453(f)(4) provides, however, that a debt instrument payable on demand or issued by a corporation or governmental unit and readily tradeable on an established market is considered a payment when received.