Liquidity refers to the ease and speed with which a financial asset can be converted to cash or used for purchases, not the payment time for liabilities.
The statement is false. Liquidity refers to how quickly a financial asset can be converted into cash or used to buy a good or service without significant loss of value, not the amount of time it takes for a liability to be paid. For instance, cash is considered to be highly liquid because you can immediately use it to make purchases, such as buying a hamburger. In contrast, assets like those in your savings account are less liquid because accessing them requires additional steps, like withdrawing the money from a bank or ATM.