Define liquidity in the stock market

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Liquidity may take on a different meaning depending on the context, but it always has to do with one thing: cash, or ready money.

Liquidity refers to the amount of money that is promptly available to meet debts or to use for investment. It indicates the levels of cash available and how quickly a financial asset or security can be converted into cash without losing significant value. In other words, how long it takes to sell. Liquidity is important because it shows how flexible a company is in meeting its financial obligations and unexpected costs. It also applies to the average individual as well. The greater their liquid assets (cash savings and investment portfolio) compared to their debts, the better their financial situation.

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