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February 27, 2009

What is liquidity?

Liquidity refers to a company’s ability to pay its bills from cash or from assets that can be turned into cash very quickly.

The quick ratio, also known as the acid-test ratio, is an indicator of a company’s liquidity.

Learn more about Financial Ratios.

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35 Responses to “What is liquidity?”

  1. omar on March 2nd, 2009 12:34 am

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  2. David Mosima on March 3rd, 2009 4:42 am

    1. The degree to which an asset or security can be bought or sold in the market without affecting the asset’s price. Liquidity is characterized by a high level of trading activity. Assets that can by easily bought or sold, are known as liquid assets.

    2. The ability to convert an asset to cash quickly. Also known as “marketability”.

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