What is liquidity risk?
Liquidity risk refers to the potential difficulty of converting an asset into cash without significantly affecting its price.
Can you give me an example of liquidity risk?
Sure! If a company holds a large amount of real estate, it may struggle to sell those properties quickly in a downturn.
How can businesses manage liquidity risk?
Businesses can manage liquidity risk by maintaining cash reserves, diversifying their investments, and having access to credit.
What are the consequences of high liquidity risk?
High liquidity risk can lead to financial distress, inability to meet obligations, and potential bankruptcy.
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