What is liquidity and why is it important to financial planning

For a company, liquidity is a measurement of how quickly its assets can be converted to cash in the short-term to meet short-term debt obligations. Companies want to have liquid assets if they value short-term flexibility. For financial markets, liquidity represents how easily an asset can be traded.

Why is liquidity important to financial planning?

Liquidity of assets helps accelerate transactions\n\n g liquid assets `reduces the time you need to spend on finding a buyer for the asset. Stocks are an excellent example of liquid assets that can be easily traded on the stock exchange on any working day.

What is liquidity and why is it important?

Liquidity is a company's ability to convert assets to cash or acquire cash—through a loan or money in the bank—to pay its short-term obligations or liabilities. How much cash could your business access if you had to pay off what you owe today —and how fast could you get it?

What is liquidity in financial planning?

Why is liquidity important? Liquidity is the ability to pay debts when they are due. Liquidity is an indicator of the financial health of a business. Every organization or an entity that is profitable will find itself in a position of bankruptcy, and it fails to meet its financial obligations to short term creditors.