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Reading a business

Lesson 84 · Written for kid, teen, and little

Liquidity: How Fast Can You Sell?

Liquidity is how quickly you can turn something into cash.

The idea

Liquidity means how fast you can turn something into cash without having to drop the price much. Cash itself is the most liquid thing there is, and shares of a big, popular company are close behind, because huge numbers of people are trading them all day. A rare comic book or a house is illiquid: you may wait weeks and still have to cut the price to find a buyer. Liquidity matters because it decides how easily you can change your mind. 💧

A

Words to know

5

liquidity

How easily something can be turned into cash. A popular stock sells in a second; a house takes months.

liquid

Easy and quick to sell for about what it is worth. Money in a savings account is as liquid as it gets.

illiquid

Slow and hard to sell without dropping the price. A rare collectible might sit for a year waiting for the right buyer.

cash

Money you can spend right away. The $20 in your pocket needs no selling first.

discount

Money taken off the price to help something sell faster. Dropping a $500 bike to $400 is a $100 discount.

Try it — no accountTrue or false

True or false about liquidity?

Card 1 of 4

Cash is the most liquid thing you can hold.

Swipe the card — or tap.

In the full lesson

  1. 1True or false
  2. 2Work out the number
  3. 3Make the call

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