What is liquidity LC
Business · Middle School · Mon Jan 18 2021
Answered on
Liquidity generally refers to how quickly and easily an asset or security can be converted into cash without affecting its market price. The term "LC" in the context of liquidity is a bit ambiguous as it is not a standard abbreviation in financial terminologies. However, it's possible that you might be referring to "Liquid Capital" (LC), or it could also be a reference to a "Letter of Credit" (LC) which is a financial instrument often used in international trade.
If you are referring to Liquid Capital, it is the amount of cash a company or individual has on hand, or assets that can be easily converted to cash. Liquid capital is important because it indicates the ability to pay off short-term liabilities or make quick investments.
If you're referring to a Letter of Credit, it is not directly a measure of liquidity but a guarantee from a bank that a buyer's payment to a seller will be received on time and for the correct amount. If the buyer is unable to make the payment for the purchase, the bank is required to cover the full or remaining amount of the purchase. It can indirectly affect liquidity, as it can make trading between distant parties easier, thus potentially increasing the liquidity of assets by making it easier to sell them