What is Liquidity?
- Liquidity is the ease with which a monetary asset may be converted into money.
How Do I Remember It?
- Think of liquidity as the “fluidity” of an asset. It’s like how easily a substance flows or moves. The more liquid an asset is, the easier it is to convert it into cash.
Real World Example
- Cash is considered the most liquid asset because it can be used immediately to make purchases or pay debts.
- On the other hand, real estate is less liquid because it may take time to sell a property and convert it into cash.
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By: Ryan Aquino
