Question

What does liquidity refer to? A) It refers to the municipality's credit risk B) It refers to the municipality's ability to track investments C) It refers to how quickly investments can be converted into cash D) It refers to how quickly cash can be used to purchase investments E) None of the above

Answer 1

Liquidity refers to how quickly you can use a financial asset to buy a good or service. For example, cash is very liquid as you can easily use it to make purchases.

Step-by-step explanation:

Liquidity refers to how quickly you can use a financial asset to buy a good or service. For example, cash is very liquid as you can easily use it to make purchases. On the other hand, investments that take longer to convert into cash, such as bonds or savings accounts, are less liquid.