A quality used to describe a financial asset is its liquidity.

Liquidity refers to the cost in time and money to convert the asset to cash or a cash equivalent.


Cash in the country of acceptance is the most liquid financial asset.


Real estate or a collectable in a down market may show a very poor liquidity.


Factors associated with liquidity:

(1) the time and effort required to sell the asset under current market conditions

(2) the fees for selling the asset

(3) the additional cost (discount) to expedite the sale


An illiquid asset may be sold at a price much below its assessed value if cash is required in a short period of time.

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