Final answer:
Liquidity is the ability to quickly convert assets into cash without significant loss, essential for meeting a company's immediate financial obligations.
Step-by-step explanation:
Liquidity is a measure of a company's cash position and its overall ability to obtain cash in the normal course of business. A liquid asset can be quickly converted into cash with minimal loss of value. The liquidity of money is essential for businesses to conduct transactions smoothly.
Cash is a highly liquid asset, allowing for easy and immediate purchases, such as buying a hamburger during lunchtime. In contrast, money in a savings account requires a trip to the bank or ATM, which makes it less accessible and therefore less liquid. Companies strive to maintain sufficient liquidity to cover short-term obligations without incurring significant losses or delays.