liquidity

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(lĭ-kwĭd'ĭ-tē)
n.

1. The state of being liquid.
2. The quality of being readily convertible into cash: an investment with high liquidity.
3. Available cash or the capacity to obtain it on demand: a bank that is increasing its liquidity by shortening the average term of its loans.

1. Ability of an organization to meet its current financial obligations. In banking, adequate liquidity means being able to meet the needs of depositors wanting to withdraw funds and borrowers wanting to be assured that their credit or cash needs will be met. Liquidity is also measured in terms of debt capacity or borrowing capacity to meet short-term demands for funds. See also Liquidity Ratios.

2. Quality of an asset that is readily convertible into cash, with minimal loss in value. Short-term securities, such as Treasury bills that are easily sold to other investors at relatively narrow spreads between bid and asked quotes, and in reasonably large trading volumes, are said to be highly liquid.

3. Characteristic of a market where a large amount of securities, futures contracts, and so on, can easily be traded with minimal price distortions occurring. Strong markets are characterized by stable prices and relatively narrow bid-asked spreads. Thin markets have wide spreads and extreme trading volatility. See also Depth of the Market.

Ease of converting assets to cash. Compare marketability.
Contrast with illiquidity.


Examples: Common stocks and U.S. savings bonds have good liquidity. real estate and many types of collectibles generally have poor liquidity.

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(li-kwid-uh-tee)

The condition of having enough money on hand to meet financial obligations without having to sell fixed assets, such as machinery or equipment.

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".

There is no specific liquidity formula, however liquidity is often calculated by using liquidity ratios.

Investopedia Says:
1. It is safer to invest in liquid assets than illiquid ones because it is easier for an investor to get his/her money out of the investment.

2. Examples of assets that are easily converted into cash include blue chip and money market securities.

Related Links:
Understanding how this measure works in the market can help keep your finances afloat. Diving In To Financial Liquidity
Lower levels of liquidity in exchange-traded funds make it harder to trade them profitably. ETF Liquidity: Why It Matters
Learn about the current ratio, quick ratio, cash ratio and cash conversion cycle. Liquidity Measurement Ratios

For a list of words related to liquidity, see:

• Banking and Financial Services - liquidity: ease with which asset can be converted to cash
• Accounting - liquidity: ease with which assets can be converted to cash

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See words rhyming with "liquidity."

Dansk (Danish)
n. - likviditet, flydende tilstand, klarhed

Nederlands (Dutch)
liquiditeit, invorderbaarheid, (mv) liquide middelen

Français (French)
n. - liquidité

Deutsch (German)
n. - flüssiger Zustand, Liquidität

Ελληνική (Greek)
n. - ρευστότητα

Italiano (Italian)
liquidità

Português (Portuguese)
n. - liquidez (m) (Fin.)

Русский (Russian)
текучесть, ликвидность

Español (Spanish)
n. - liquidez

Svenska (Swedish)
n. - flytande tillstånd, likviditet

中文（简体）(Chinese (Simplified))
流动性, 流畅

中文（繁體）(Chinese (Traditional))
n. - 流動性, 流暢

한국어 (Korean)
n. - 유동성, 현금

日本語 (Japanese)
n. - 流動性, 流麗

العربيه (Arabic)
‏(الاسم) سيوله‏

עברית (Hebrew)
n. - ‮נזילות, זמינות‬

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