Liquidity refers to a company's ability to meet its short-term obligations. It is a measure of how easily a company can convert its assets into cash to pay its bills and other liabilities. High liquidity indicates that a company has a lot of liquid assets, such as cash, marketable securities, and accounts receivable, that can be easily converted into cash. This means that the company is well-positioned to pay its bills and other obligations as they come due. Low liquidity, on the other hand, indicates that a company has few liquid assets and may have difficulty paying its bills and other obligations on time. This can be a sign of financial distress and can put the company at risk of bankruptcy or other financial difficulties. Liquidity is an important concept in finance because it is a key determinant of a company's financial health and stability. It is typically measured using liquidity ratios, such as the current ratio and the quick ratio, which compare a company's liquid assets to its liabilities. A company with a high level of liquidity is generally considered to be in a stronger financial position than a company with low liquidity.