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Liquidity

February 3, 2021

Describes the extent to which assets or rights can be converted into cash without
causing a significant decrease in the asset’s price. Accordingly, liquidity is often
inversely proportional to the profitability of the asset and involves the trade-off
between the selling price and the time needed to convert it to cash. In finance,

cash is considered the most liquid asset and cash is sometimes used as a syno-
nym for liquidity (e.g. cash reserves; cash pooling…).

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