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Liquidity is a concept in finance, which refer to the extent of an asset can be bought or sold on the market without affecting the original market value of the asset. For example, securities or debts, receivables … can easily be converted into cash, convenient for payment or spending. A highly liquid asset is usually characterized by a large number of transactions.
In accounting, current assets are divided into five categories and are classified in terms of liquidity from high to low as follows: cash, short-term investments, receivables, short-term advances, and inventory.
Thus, cash is the highest liquidity, always used directly for payment, circulation, hoarding. Inventory has the lowest liquidity as it has to go through the distribution and consumption phase to become receivables, then from receivables after a period of time to transfer into cash.
Cash is considered the standard for liquidity, because it can quickly and easily be converted into other assets. – The liquidity of a financial corporation is that the financial group has a capital adequacy ratio of less than 8%, its out-of-control ability, its ability to raise capital and credit investment. For weak economy, low risk reserve, high bad debt.

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