Liquidity | Practical Law

Liquidity | Practical Law

Liquidity

Liquidity

Practical Law Glossary Item 7-382-3591 (Approx. 2 pages)

Glossary

Liquidity

The ease with which an asset can be converted to cash without a significant loss in value.
In the context of finance, the extent to which an asset can be readily bought or sold in the market without affecting its price. A market is said to be liquid if the instruments traded on that market can easily be bought or sold in large quantities with minimum or no loss of value.
In the context of a company's financial condition, the ability to meet obligations when they come due with minimum loss. Liquidity is managed by monitoring and projecting cash flows to maintain a balance between short-term assets and short-term liabilities.