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