Hey ladies, great morning to you. We just thought to share the below with you.
Liquidity is more of a short-term measure. It refers to the ability of a business to quickly turn assests into cash without loss. If your business needs money, you may have to sell assets. Unless the asset is cash, the most liquid asset of all, you may lose money by selling. For example, you may not get full value if you sell receivables. And if you try to sell equipment, you will probably take a loss because the equipment has most likely depreciated.
If you’re liquid, you have enough cash or other easily liquidated assets that you can pay your immediate bills or pay your employees. This is called positive cash flow, and positive cash flow means liquidity.
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