1. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity.2. The ability to convert an asset to cash quickly.
A high level of trading activity, allowing buying and selling with minimum price disturbance. Also, a market characterized by the ability to buy and sell with relative ease. Antithesis of illiquidity.
The ability of an asset to be converted into cash quickly and without any price discount.
Cash and assets easily converted to cash are liquid assets, and liquidity is the extent to which an individual or firm can produce cash when necessary. A high degree of liquidity implies that a company isn''t immediately going to fail in the event of a downturn in its business or the economy. That means increased safety for investors, but it comes at a price: cash and cash-like assets usually produce the lowest returns. Thus, a company sitting on a large pot of cash suffers reduced profitability compared to a similar company with all its assets brought to bear on its profitable business activities.
The liquidity of a stock is the ease with which the market can absorb volume buying or selling, without dramatic fluctuation in price.