Liquidity

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1.

An asset's ability to be turned into cash quickly and without significant loss compared with current market value.


2.

An entity’s ability to pay its obligations when they fall due, especially in the short term.


3.

An entity's ability to source additional funds to meet its obligations, including in the medium and longer term.


4.

A financial measure designed to quantify an entity's ability to meet its obligations when they fall due.

  • For non-financial organisations, simple measures of liquidity include the current ratio and the quick ratio.
  • For banks and other financial institutions, liquidity measures include those which identify how long the bank could survive if wholesale funds were to dry up and retail funding was heavily stressed. This period is known as the survival period.


See also


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