Liquidity refers to how easily assets can be converted into cash without affecting their market value. In business, high liquidity means a company can quickly access funds to pay suppliers, cover expenses, or respond to emergencies. This is crucial for financial stability, as low liquidity may force a company to sell assets at a loss or struggle to meet its obligations. Common examples of liquid assets include cash, bank account balances, and marketable securities. Maintaining adequate liquidity helps organizations manage risks and operate smoothly, especially during unexpected financial challenges.