Define: Liquidity

UK Accounting Glossary

Definition: Liquidity

Quick Summary of Liquidity

The extent to which a business has access to cash or items which can readily be exchanged for cash.

What is the dictionary definition of Liquidity?

Dictionary Definition

  1. finance The degree of which something is in high supply and demand, making it easily convertible to cash
  2. uncountable The state or property of being liquid.
  3. economics, countable An asset’s property of being able to be sold without affecting its value; the degree to which it can be easily converted into cash.


  • A measure of the extent to which a person or organization has the cash to meet immediate and short-term obligations or assets that can be quickly converted to do this.
  • Accounting: The ability of current assets to meet current liabilities.
  • Investing: The ability to quickly convert an investment portfolio to cash with little or no loss in value.


Full Definition of Liquidity

The level of ease a company has in quickly generating cash by selling assets without losing value. These assets are often called “liquid assets.”


Examples of Liquidity in a sentence

A profitable company will balance long-term investment with short-term liquidity.
Because her company moves most of its profits into various bank accounts, rather than into new equipment or property, it has a high degree of liquidity.

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Liquidity. Payroll & Accounting Heaven Ltd. February 28, 2020
Chicago Manual of Style (CMS):
Liquidity. Payroll & Accounting Heaven Ltd. (accessed: February 28, 2020).
American Psychological Association (APA):
Liquidity. Retrieved February 28, 2020, from website:

Definition Sources

Definitions for Liquidity are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 23rd December 2018.