Definition 1.
1. The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity.2. The ability to convert an asset to cash quickly.
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Definition 2.
A high level of trading activity, allowing buying and selling with minimum price disturbance. Also, a market characterized by the ability to buy and sell with relative ease. Antithesis of illiquidity.
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Definition 3.
The ability of an asset to be converted into cash quickly and without any price discount.
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Definition 4.
Cash and assets easily converted to cash are liquid assets, and liquidity is the extent to which an individual or firm can produce cash when necessary. A high degree of liquidity implies that a company isn''t immediately going to fail in the event of a downturn in its business or the economy. That means increased safety for investors, but it comes at a price: cash and cash-like assets usually produce the lowest returns. Thus, a company sitting on a large pot of cash suffers reduced profitability compared to a similar company with all its assets brought to bear on its profitable business activities.
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Definition 5.
The liquidity of a stock is the ease with which the market can absorb volume buying or selling, without dramatic fluctuation in price.
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