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Trading and Investment Terminology

Liquidity

Liquidity means how quickly you can get your hands on your cash. 

In simpler terms, liquidity is to get your money whenever you need it.

In other words, liquidity describes the degree to which an asset can be quickly bought or sold in the market at a price reflecting its intrinsic value. 

 

The following assets can also be liquidated easily

Cash

Cash Equivalents

Accrued Income

Stocks

Government Bonds

Promissory Notes

Accounts Receivable

Marketable Securities

Certificate of Deposits

  • Financial liquidity refers to how easily assets can be converted into cash.
  • Assets like stocks and bonds are very liquid since they can be converted to cash within days.

For example, if an investor was to sell to another collector, they might get full value if they wait for the right buyer. However, the item could be sold at a discount to its value if done through a dealer or broker if cash was needed.

 

 

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