Direct answer
What does liquidity mean?
Liquidity is the ease and speed with which an asset can be converted to cash without a substantial loss in value.
Exam cue: Real property is generally less liquid than publicly traded cash equivalents because sale takes time and has transaction costs.
What does it look like in a question?
Example
An investor may need months to market and close the sale of an apartment building.
Common exam trap
What should you not confuse it with?
Liquidity is not the same as profitability or solvency.
Related commercial and investment terms
Cash flowCash flow is the money remaining or changing hands during a period after the receipts and payments included in the stated calculation.Effective gross incomeEffective gross income (EGI) is the income expected or received after vacancy and collection loss, plus other property income included in the analysis.Gross leaseA gross lease is a lease in which the landlord pays specified property operating expenses from the rent received.LeverageLeverage is the use of borrowed money to finance part of an investment.Net leaseA net lease is a lease under which the tenant pays specified property expenses in addition to rent.Net operating incomeNet operating income (NOI) is the income a property has left after vacancy and operating expenses but before debt service and income taxes in the standard real estate formula.
Sources used1 reference with section locators
The curriculum citation confirms exam scope. Definition and rule citations support the explanation itself.
Keep learning
Put the term back into its full subject.
A definition helps with recall. The subject guide shows how the rule interacts with documents, scenarios, calculations and practice questions.