Why it matters
An asset’s estimated value does not tell you how quickly it can be turned into cash. Transaction size, buyers and market conditions affect the practical ability to sell.
A worked example
Cash is readily spendable. Selling a specialist machine may take weeks and require a discount, despite a high appraised value.
Illustrative example · simplified assumptionsA common mistake
Equating valuable assets with immediately usable cash.
Where the idea needs care
Liquidity depends on market conditions and trade size. It differs from solvency and from asset profitability.
Apply the idea
Explain this concept using a different example from your spending, work, business or a policy debate. State what stays fixed and what could change the result.
Sources and further study
Examples and explanations by Alibomics. Numeric illustrations are not current market quotations.