Liquidity refers to the ease and speed with which an asset can be converted into cash without significant loss in value. It is a measure of how quickly a company can meet its short-term obligations using its available assets. A company with high liquidity is able to cover its short-term liabilities and obligations without having to sell its long-term assets or take on additional debt.

Solved

What Is Liquidity

Question 122

Multiple Choice

What is liquidity?

A) Liquidity is gross profit minus operating expenses.
B) Liquidity is a shipping term that applies to freight sent by boat.
C) Liquidity is the ability to convert an asset to cash quickly.
D) Liquidity is a measure of the fragility of certain types of inventory.

Correct Answer: