Liquidity

Liquidity refers to the ease with which an asset or security can be converted into cash without affecting its market price. In simple terms, it refers to the amount of cash or cash equivalents that are readily available to a company or an individual. The more liquid an asset is, the easier it is to buy or sell it in the market. Liquidity is important because it allows businesses and individuals to meet their financial obligations quickly and efficiently. It also helps them to take advantage of investment opportunities that may arise at any time. In addition, liquidity ensures that markets function smoothly and efficiently, allowing investors to buy and sell assets without disrupting the market. Lack of liquidity can lead to market volatility, price distortions, and financial instability.