YOU ASK:
What is the definition of Liquidity?
WE ANSWER:
Liquidity refers to the capacity of a business to sell its assets to obtain cash. This is done ideally without any penalties or discounts so as to protect and preserve the asset's price.
Assets that are quickly sold or bought, without no or little discounts are called liquid assets. The more liquid assets a company has, the higher the liquidity will be.
It is also to be noted that too much liquidity may not be good. This will mean that the individual or company is not making good use of their funds by investing it where it can earn a better rate of return.
Liquidity is an important measure in insurance companies, as this provides an idea of how fast it can sell its assets in order to pay for the claims.
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More insurance terms around liquidity:
- Liquor Liability
- Lloyds
- Lloyd’s of London
- Long-Term Care Insurance
- Long-Term Disability Income Insurance
- Loss
- Loss Adjustment Expenses
- Loss Costs
- Loss of Use
- Loss Ratio
- Liquidation
- Line
- Limits
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- Life Income with Refund Annuity
- Life Annuity
- Life Annuity with Period Certain
- Liability Insurance
- Level Premium Policies
- Law of Large Numbers