When it comes to financial asset management understanding the ability to turn assets into cash is important. When an emergency comes up or an opportunity to make a substantial investment presents itself it is imperative to have access to the money needed without long wait times.
What Is Liquidity
Liquidity refers to the ability to take assets and turn them around into spendable or investable cash. Cash is, itself, the most liquid asset since it is easily spendable as it is. Other types of investments vary in liquidity – which means how easy are they to convert to cash. To have a firm idea of the financial state of someone attempting to make a major purchase or investment, they would be asked “how liquid are you?” Since some assets are not easily convertible they are still valid investments but don’t aid in liquidity in the event a person needs a … Read More