Liquidity
The capacity to meet short-term obligations or convert assets into cash quickly.
Detailed Description
Liquidity
What does liquidity refer to in finance?
Liquidity refers to the ease with which an asset can be converted into cash without significantly affecting its market price.
Why is liquidity important for businesses?
Liquidity is important because it impacts a company's ability to cover short-term liabilities, invest in growth, and withstand economic downturns.
What are the main types of liquidity?
The main types of liquidity are market liquidity, accounting liquidity, and funding liquidity.
What is the current ratio?
The current ratio is calculated by dividing current assets by current liabilities and indicates a company's liquidity position.
How does real estate typically compare in terms of liquidity?
Real estate is often less liquid compared to other asset classes because properties can take time to sell and involve significant transaction costs.