Liquidity
Plain definition
How quickly and cheaply an asset can be converted into cash (or used as cash) without losing value.
In economics
Liquidity is the key property that ranks assets: cash and checking deposits are perfectly liquid; houses and specialized equipment are illiquid. Central banks care about liquidity because it determines how fast money can flow into spending, and investors demand higher returns (a liquidity premium) for holding illiquid assets.
Example
Government bonds can be sold in seconds at market price, so they are highly liquid. A family-owned factory might take months to sell and lose value in a forced sale, so it is illiquid. During financial crises, investors rush to cash, the most liquid asset of all.
Liquidity is confused with solvency. A firm can be solvent (assets exceed liabilities) yet illiquid (assets tied up and cannot be sold quickly to pay bills). Liquidity crises are about timing and convertibility, not necessarily about being broke.