Liquidity refers to the ease with which an investor can buy or sell a particular asset without changes in its price. Stocks with low liquidity might be seen as riskier than other stocks due to difficulties in exiting them.
Liquidity can also mean the ability of a company to raise cash. High liquidity is favourable for a company as it can help in smooth operations.
Liquidity can also refer to the accessibility of cash in an economy. High liquidity in an economy can boost consumption expenditure but might also lead to inflation. Low liquidity can hurt consumption expenditure, but it can help alleviate inflation.
