Liquidity

Taxonomy

Liquidity is a term to describe the level of ease at which and asset can be bought or sold without affecting its price. Something with a high level of liquidity changes hands very easily. Cash is considered the most liquid asset there is because it can almost always be exchanged for any item which is up for sale. For example, someone selling a used car will gladly accept cash in exchange for it. Fine art on the other hand is not very liquid. If a person were to head to a used car dealership with a piece of fine art, the dealer would probably not accept the piece of art as payment because it would be difficult for the car dealer to turn around and sell it.