Liquidity

Liquidity refers to how quickly and easily an asset can be converted into cash without significantly affecting its value. For example, cash is the most liquid asset because it can be used immediately for transactions. Stocks and bonds are also relatively liquid because they can typically be sold quickly. Conversely, real estate or collectibles are less liquid since they may take longer to sell and might require accepting a lower price. High liquidity ensures smooth financial operations and flexibility, while low liquidity can pose challenges when quick cash access is needed.