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Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: Market liquidity, the ease with which an asset can be sold. Accounting liquidity, the ability to meet cash obligations when due. Liquid capital, the amount of money that a firm holds. Liquidity risk, the risk that an asset will have ...
A liquidity trap is a situation, described in Keynesian economics, in which, "after the rate of interest has fallen to a certain level, liquidity preference may become virtually absolute in the sense that almost everyone prefers holding cash rather than holding a debt ( financial instrument) which yields so low a rate of interest." [ 1]
Finance refers to monetary resources and to the study and discipline of money, currency and capital assets. [a] As a subject of study, it is related to but distinct from economics, which is the study of the production, distribution, and consumption of goods and services. [b] Based on the scope of financial activities in financial systems, the ...
Solvency and liquidity are related, but very distinct, terms that are valuable to investors. When a company is solvent, it means the company has the ability to pay its debts and liabilities over ...
A major rival to the liquidity preference theory of interest is the time preference theory, to which liquidity preference was actually a response. Because liquidity is effectively the ease at which assets can be converted into currency, liquidity can be considered a more complex term for the amount of time committed in order to convert an asset.
Liquidity is a prime concern in a banking environment and a shortage of liquidity has often been a trigger for bank failures. Holding assets in a highly liquid form tends to reduce the income from that asset (cash, for example, is the most liquid asset of all but pays no interest) so banks will try to reduce liquid assets as far as possible.
Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and ...
Market liquidity. In business, economics or investment, market liquidity is a market's feature whereby an individual or firm can quickly purchase or sell an asset without causing a drastic change in the asset's price. Liquidity involves the trade-off between the price at which an asset can be sold, and how quickly it can be sold.