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Liquidity

Liquidity is the availability of cash or assets quickly convertible to cash to meet short-term obligations.

Why It Matters

•A business can be profitable yet still face cash shortages.
•Inventory decisions directly affect liquidity by locking capital for long periods.
•Critical for funding growth, paying suppliers, and absorbing demand fluctuations.
•Low liquidity increases financial risk and limits scaling capacity.

Connection to Capital

Liquidity reflects how much capital is tied in inventory versus available for new investment.

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