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What does the term 'liquidity' refer to in finance?

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Question: What does the term \'liquidity\' refer to in finance?

Options:

  1. The ability to pay debts
  2. The ease of converting assets to cash
  3. The amount of cash on hand
  4. The total value of investments

Correct Answer: The ease of converting assets to cash

Solution: 

Liquidity refers to the ease with which an asset can be converted into cash without affecting its market price.

What does the term 'liquidity' refer to in finance?

Practice Questions

Q1
What does the term 'liquidity' refer to in finance?
  1. The ability to pay debts
  2. The ease of converting assets to cash
  3. The amount of cash on hand
  4. The total value of investments

Questions & Step-by-Step Solutions

What does the term 'liquidity' refer to in finance?
  • Liquidity – Liquidity refers to the ease with which an asset can be converted into cash without affecting its market price.
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