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Liquidity in Small Business: What It Means and Why It Matters

Liquidity for a small business means the ability to cover its short-term financial obligations. It refers to the ease with which the assets can be converted to cash.

By calculating and tracking different ratios of your company’s assets and liabilities, you can measure your business’ liquidity. This is necessary for spotting cash flow problems and checking if your business is in good financial health.

What this article covers:

  • What Is Liquidity in Accounting?

  • What Is Liquidity Ratio?

  • Why Is Liquidity Important?

  • How Can Liquidity Be Improved?


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