key term - Liquidity

Definition

Liquidity measures how quickly and easily an asset can be converted into cash without significantly affecting its value. In the context of a balance sheet, it indicates a company's ability to meet short-term obligations with its most liquid assets.

Related terms

Assets:

Resources owned by a company that have economic value and can be converted into cash.

Current Liabilities:

Financial obligations a company is due to pay within one year, including debts and accounts payable.

Cash Flow:

The total amount of money being transferred in and out of a business, especially affecting liquidity