FINANCE GLOSSARY
Liquidity
Liquidity
The ability to meet obligations using cash or assets readily converted to cash.
What does Liquidity mean?
The ability to meet obligations using cash or assets readily converted to cash. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Liquidity in context
A company with strong cash reserves can absorb an unexpected repair without new borrowing.
Why it matters in financing
Liquidity can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related finance terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.