The ability of an asset or investment to be easily converted into cash without significant loss of value.

Liquidity refers to the ease and speed at which a business can convert its assets into cash to meet its short-term obligations. It measures the financial health and ability of a company to pay its debts and expenses promptly. High liquidity indicates sufficient cash and liquid assets, allowing businesses to navigate unexpected expenses or take advantage of growth opportunities. Maintaining an optimal level of liquidity is crucial for small business owners to ensure smooth operations, manage cash flow, and respond to financial challenges effectively.