Liquid capital refers to the assets that a company or an individual can quickly convert into cash without a significant loss in value. It primarily includes cash or cash equivalents, like checking accounts, savings accounts, and highly liquid investments such as stocks, bonds, and mutual funds that can be sold easily in the market.
The reason liquid capital is crucial is that it provides the necessary funding for operational costs, unexpected expenses, and investment opportunities. Businesses need to maintain a certain level of liquid capital to ensure they can meet their short-term obligations, pay employees, purchase inventory, or invest in growth opportunities without having to sell long-term assets.
In summary, liquid capital is the financial cushion that allows individuals and companies to remain agile, respond to unforeseen circumstances, and seize opportunities as they arise.