Can some one please explain liquidity and give a very easy example? please be simple?

Question

Can some one please explain liquidity and give a very easy example? please be simple?

Answer 1

Liquidity defines the volumes of shares traded on a particular share trading company.....

Example :-

1)XYZ company shares is trading at Rs.12 and have 10,000 as buyers and 15,000 as sellers at a particular time.....The gap between the prices of buyers are sellers are huge (buyers at 11.9, 11.2, 10.5 and so on) whereas sellers prices are (12.1, 12.4,12.9,13.5 and so on) and the whole day trading volume is of 20,000  qty only.....

This shows that the company share has ir-regular buyers and sellers with loose price bids on both sides and the volume are also not compareable with any other stock.....

2)ABC company shares is trading at Rs.12 and have 10,000 as buyers and 15,000 as sellers at a particular time.....The gap between the prices of buyers are sellers are not huge (buyers at 11.9, 11.85, 11.8 and so on) whereas sellers prices are (12.1, 12.15,12.20,12.25 and so on) and the whole day trading volume is of 10,00,000  qty .....

This shows that the company share has regular buyers and sellers at very tight price bids by both buyers and sellers and the volume are also not significant.....

Example 1 defines a stock which is not called as a liquid stock, but example 2 defines a stock which is a liquid ....

Answer 2

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Answer 3

Liquidity involves the ability to easily convert an asset into cash.

Stocks and bonds are considered liquid because they can be sold quickly for cash.

Real estate isn't considered liquid because it takes some amount of time to complete a sale and get your cash.

Answer 4

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