Question

The term "liquidity" refers to

Answer 1

The correct answer is A) how quickly money can be exchanged.

The term "liquidity" refers to how quickly money can be exchanged.

When a company has "liquidity," it means that it has money to use immediately to use in whatever financial operation. For instance, a company has to pay some obligation at the end of the month but it has no "liquidity" because most of its investment is on gold or land. The company has to convert those investments to "liquid" form, cash, money in the bank account in order to use it and be exchanged.

Answer 2

The term "liquidity" refers to how quickly money can be accessed or exchanged.

"Liquid" assets are those that flow freely. If a person or organization has certain amounts of cash on hand, those dollars are liquid and readily can be exchanged for assets or use to pay debts or make purchases. Liquid assets are investments or items that can quickly be exchanged for cash, converted into money that can be used to pay debts or make purchases.