Q.Write a short note on: Liquidity

Liquidity is the degree to which an asset can be converted into cash quickly and without loss of value; money is the most liquid asset.

Explanation

Liquidity refers to the quality of an asset of being easily and quickly convertible into cash without any loss of its value. Money (cash) possesses perfect liquidity because it is itself a ready and generally accepted means of payment. Other assets differ in their liquidity: a savings deposit or a treasury bill is highly liquid, while assets like land or buildings are much less liquid because they take time to sell and may be sold at a loss. People prefer to hold a part of their wealth in liquid for …