Liquidity

Liquidity refers to how easily an asset can be converted into cash without affecting its price. In a business context, liquidity typically refers to a company’s ability to meet its short-term obligations using its most liquid assets, such as cash or easily marketable securities.

The concept of liquidity is vital for assessing a company’s financial health. Companies with high liquidity can cover their operating expenses, manage unexpected costs, and seize opportunities for growth without relying on external financing. In markets like the UAE, where businesses are expected to have sufficient liquidity for smooth operations, managing cash flow and liquid assets is critical for avoiding cash shortages and financial strain.